You'd have to be a brave soul to bet your mortgage or rent payment on a firm prediction of which month we'll see net growth in employment. But while today's Labor Department report on unemployment compensation claims shows a continuing downward trend that began last spring, it is increasingly likely the first month of job growth will not take place until 2010. And the report provides more evidence that we face the possibility of what is described by that insulting term invented in 1992, a "jobless recovery."
Employment, always a "lagging indicator" of economic health, seems on a path toward reinforcing the trend of the past two recessions, lagging quite a bit more than historically was the case in post-World War II recessions before 1990-91. In other words, it could be a very long time before the U.S. economy sees as many people employed as had jobs in December 2007, when the Great Recession officially began. Since then, based on adjustments by the Bureau of Labor Statistics, more than 8 million jobs have been lost.
Click for a larger version of this Calculated Risk chart.
Today's weekly DoL report showed 531,000 people made initial claims for unemployment benefits in the week ending October 17, a rise of 11,000 over the previous week. The four-week running average, which smooths out the volatility of the weekly numbers, dropped slightly from 533,000 to 532,250. Continuing claims fell nearly 100,000, with the four-week running average of continuing claims still hovering around the 6 million mark. The positive nature of that latest continuing claims number may well be distorted by the fact some Americans have exhausted their benefits and therefore don't show up in the statistics. About 40% of American workers are covered by unemployment insurance.
The drop in unemployment claims previously this month indicates that the number of layoffs in October - which we will find out about on November 6 - will be less than September's unexpected surge. But there is a good chance layoffs will still be above 200,000 for the month and official unemployment will hit 10% or more. The official rate of unemployment and underemployment is now 17% - 26.6 million Americans - although some critics say even that high figure understates the problem.
Timothy Aeppel and Conor Dougherty at The Wall Street Journal reported Tuesday:
Companies across the economy are holding off on hiring even as the profit outlook improves, amid economic uncertainty and their own success at raising productivity in rough waters.
Hiring always lags behind in economic recoveries, but the outlook this time is worse, many economists say. Most forecasters now expect a prolonged period of high unemployment, even though the government is expected to report next week that the economy grew in the third quarter, after four quarters of contraction. That is sure to frustrate the jobless and could be a problem for the Obama administration.
There are several major factors behind the trend, which is coming on top of sharper-than-expected job cuts in the recession. Many businesses have nagging doubts about the durability of the upturn, attributing much of the recent growth in orders to a move by their customers to rebuild inventories and to government stimulus spending, rather than underlying strength in their markets.
Equally worrisome in the unemployment statistics, according to David Altig, senior vice president and research director at the Atlanta Fed: small businesses which usually account for a third of net employment gains now account for 45% of layoffs; the percentage of workers forced to cut back to part-time is at a record high; and the percentage of permanent employee layoffs is at a record high.
Many observers - experts and amateurs - believe that additional stimulus, whether as part of energy legislation or something else, is required to get jobless Americans back to work more quickly than the statistics seem to indicate will otherwise be the case. More than a few have suggested a modern version of the Civilian Conservation Corps. or the Works Progress Administration, two New Deal programs that provided millions of jobs during the Great Depression. At the same time, however, deficit hawks and right-wingers claiming that FDR's action delayed recovery in the 1930s, have argued that expanding government spending for such a purpose would have damaging long-term economic consequences. None of them, I suspect, is among the record numbers of Americans queuing up for Food Stamps.
