Ugly Jobs Report Puts a Dent in V-Shaped Recovery Scenario

by: The Fundamental Analyst

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NFP 3month MA Sep 09

The trend of less bad payroll reports was interrupted in September with a net -263,000 non-farm payrolls lost. July was revised from a loss of -276k to a loss of -304k, whilst August was revised from a loss of -216k to a loss of -201k. Details of the report in brief were as follows:

Goods-producing -116
Construction -64
Manufacturing -51
Service-providing -147
Retail trade -39
Professional and business services -8
Education and health services +3
Leisure and hospitality -9
Government -53

US unemployment rate Sep09

The unemployment rate rose to a 26 year high of 9.8%, however that number is actually flattered by the drop in the labor force participation rate from 65.5% to 65.2%. If we get a bounce back in the participation rate next month the unemployment rate will most certainly punch through 10%. Add in so-called discouraged workers and those working part-time for economic reasons, the unemployment rate rises to 17%.

NFP Weekly Hoours Worked Sep09

Average Weekly Hours worked fell to an equal record low of 33.0 hours down from 33.1 in August.

US Employment Declines Sep09

The chart above tells the story of how deep the decline in payrolls has been during the great recession. In total, 7.2 million jobs have been lost since December 2007 representing 5.2% of the labor force from the peak, equaled in percentage terms only by the 1948-50 experience in the post WWII era.

However another number that should receive a lot of attention in Friday’s report is the preliminary benchmark revision which estimates non-farm payroll revisions of approximately -824k., That would put total job losses over the 8 million mark, representing 5.8% of the workforce, easily the worst in the post WWII era and with at least a few more months of negative payrolls to come, we could easily get to 6% plus before the economy starts to add jobs.

US unemployment 27weeks Sep09

After dipping in August the duration of unemployment continues to set new records with now more than 35% of the unemployed being without a job for more than 27 weeks whilst the number of unemployed for more than 15 weeks hit a new record of 54.9% . All in all, a very ugly employment report that puts a dent in the V-shaped recovery scenario of the optimists.