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Unemployment Report July 2, 2009

Posted by Larry Doyle on July 2, 2009 9:02 AM |

The widely anticipated July Unemployment Report covering the month of June was just released. Let’s dive right in and take a look at the numbers . . .

Unemployment Rate
April 8.5%
May 8.9%
June: 9.4%
July: 9.5%

> LD’s comment: consensus forecast was for the rate to move to 9.6%. However, it is now widely regarded that this rate will not only go into double digits soon, but then stay there. Why? The workforce is going to grow as individuals who would have retired stay employed or look to reenter the workforce.

Non-Farm Payroll (click here for definition of this term)
April: loss of 663k (revised from -663k to -616k and back to -652)
May: loss of 539k (revised from -539k to -519k…thanks AK!!)
June: loss of 345k (revised to -322k…thanks AK!!)
July: loss of 467k

> LD’s comment: this number is decidedly worse than the forecast of a loss of 365k jobs. Revisions to prior months were mildly positive adding 8k jobs. Overall assessment of this number is ‘no green shoots’ here.

Average Hourly Earnings
April: +.2
May : +.1
June: +.1%
July:  —  (i.e unchanged)

> LD’s comment: no surprise that there is little wage pressure …the annual increase in wages of 2.7% is the lowest in 4 years.

Average Hourly Workweek
April : 33.2 hours
May: 33.2 hours
June: 33.1 hours
July: 33.0 hours

> LD’s comment: this number is a big deal!! The 33.0 hour workweek is the shortest workweek since 1964!!! What does this mean? An indication of no pickup in orders or inventory pickup. This number combined with the hourly earnings is an indication that retail sales will remain weak as consumers continue to be constrained and insecure about their future.

Further Color: The auto industry lost 27k jobs last month. The industry has lost 335k jobs in total, a full third of the total employment in the industry. Manufacturing lost 136k jobs, professional and business lost 118k jobs, construction lost 79k jobs.

Long term unemployed, that is individuals out of work more than 27 weeks, now represents 30% of overall unemployed. This is very troubling. Bloomberg reports,

Unemployment will “remain painfully high for several more years,” Federal Reserve Bank of San Francisco President Janet Yellen said this week.

Market Reaction: equity futures have sold off sharply on this weak report. The futures were down approximately .2 right before the report’s release and are now down more than 1.5%. Interest rates have moved lower by 3 -4 basis points led by the front end of the curve. The dollar got hit marginally after the report as well.

I view this report as a “reality check.” What do I mean? The economy is in the process of adjusting to the lack of credit provided by the shadow banking system and that credit is not returning anytime soon.

In this economic environment, I believe unemployment is a leading indicator and thus I view this report as a sign that delinquencies, defaults, and foreclosures will continue to increase across all classes of debt.

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  • Sure happy I did not graduate from college this year and have to look for a job!

    • Sons…just keep working hard in school because regardless of the economy, the cream always rises to the top!! This too shall pass and those who have prepared themselves will thrive.

  • Aaron kramer

    Larry the data is troubling but your revision numbers are off slightly. Apr. -652, May -519 and June -322. the real issue for the last two months is the weight the the birth death model is having on the numbers. The model is adding 200,000 plus jobs into the number. I don’t know about you but this seems highly unlikely. Ultimately the numbers will be restated over the coming months and with the annual benchmark revisions. You can safely add another 125K in loses to the number in each of the last two months. The model has a large seasonal affect in the summer. Things have not stabilized they are getting worse.

    • Aaron…thanks for these inputs and revisions of prior revisions. I was remiss in not adding that color.

      I agree that the “model” is likely still overstating the accuracy of the true employment situation. Additionally to call employment a lagging indicator is a misnomer in this economy.

      The structure of the economy itself has changed. Analysts do not want to admit it. Better to keep consumers and investors in the dark. On that note, thanks for shedding light on the revised revisions.

      • Aaron kramer

        You are absolutely correct about the shift in the structure of the economy. That is why the household employment figures in combination with the underemployment data show a troubling and deteriorating picture. The bottom line is the banking system is completely insolvent and only time and a stabilized economic picture can fix it. Unfortunately we cannot stabilize the economy through government intervention. The irony is that massive deflation would allow savers to recapitalize the system with greater affect than the current programs in place. Of course 80% of the banking system and possibly the Fed and US treasury/government would collapse.

        • Aaron…I concur. Thanks for providing real insight into our current economic challenges. Our country needs more light shed on our issues not less.

  • TeakWoodKite

    It appears that there is no way to “spend” our way out of this abyss as the pols would have us believe. It is sham to suggest that un-employment is a lagging indicator for the simple reason that Uncle Sam “owns” the market. With no growth in financial services or any substantive reform of oversight of the banking system, what jobs will be available will be part time at best and void of health care benefits.
    Add the “Cap my income and trade my job” the energy sector will be taking a hit and none of it looks like FUBAR.

    What a stranger in a strange land.

  • Mike

    As a recent college grad of spring 2009, I can tell you first hand that jobs are very difficult to come by right now.

    There are internships (free labor), manual labor jobs @ $9 – 10$ an hour, and door-to-door insurance sales with no base salary. I never thought that getting a decent starting job at a reputable company with modest salary and benefits would be so impossible.

    It’s actually a big part of why I’m trying to learn as much as I can about the financial markets.

    Good luck out there!

    • greenland

      I cant get the manual labor jobs at $7-$8 an hour, by virtue of having a college degree.

      Hanging yourself: vastly less expensive than graduating college.

  • Mike,

    Have you checked out the material I have at the Career Planning tab here at Sense on Cents?

    In regard to the learning, glad you found Sense on Cents.

  • coe

    I think you are dead on, LD, in capturing the message behind these numbers, and the fact that we have plenty to be concerned about…I would also like to submit a more binary variation on the theme of the 9.5% unemployment rate – and that is that one’s personal take on unemployment is that it is either 0% if you have a job, or 100% if you don’t…and beyond that there is the multiplier effect – we all have relatives or neighbors or acquaintances who have lost their jobs, and they, in turn have been forced to make serious compromises even as they diligently pursue new work – and that these adjustments in confidence, in spending, and in productivity have been quite draining and difficult to bear – particularly when all seems hopeless…have we become so jaded that a number like 467,000 folks losing their jobs barely gets a yawn from the media…green shoots – challenge! unemployment/the price of oil/our binge debtor nation status/the banks/the auto industry/the health care challenges/the cap and trade restructuring/the brink of bankruptcy of municipalities and states/the geopolitical hot spots/immigration/taxes – and yet the cult of celebrity focuses 24/7 on the Michael Jackson circus, the Mark Sanford scandal, the Shaquille O’Neal trade…I guess there are 467,000 more unemployed people who can be watching these life and death stories unfolding all day…as we approach the long Fourth of July weekend, I don’t think I am much different than most of us in that I love this country for all that is right and free, and applaud the resiliency, grit, and indomidable spirit and sense of moral honor of the American people, but all of these elements listed above are serious issues…We have to know in our hearts that it will take serious people with seriously sound ideas and leadership to tackle them…keep up the good work, LD!
    P.S. – Sorry, forgot to tell you great post!

  • Senneth

    Thank you for all of your articles which keep me informed. I appreciate you very much, Larry.

  • Senneth,

    My pleasure. Thanks for your gracious comment.

  • MD

    Thank you so much for keeping the topic of congress and the stalled unemployments benefits legislation as part of the debate.

    I am one of those nameless, faceless millions that has been abruptly cut-off of unemployment that you were talking about and I am outraged at how congress is treating us. I am a college graduate and have worked hard all my life. Congress is sticking their middle finger up at us. I just paid my rent with the last money in my account. I am going to be 2 months behind on utilities. I have my last $20 to eat for the rest of the week….my bank account will then say $0. I am holding my breath for July 12th.
    My cousin is a college educated Lan Administrator and certified computer person and his has been pounding the pavement like an animal for a job. His unemployment benefits got cut at the worst time and he is now losing his apartment so he has to move in with my aunt, uncle and her daughter and 3 kids…I feel like I am having a bad dream.
    My brother… a hard working AMERICAN…is losing his business of many years…his marriage has fallen apart and he will now have to move into the basement of a fellow college mate until he can back on his feet.

    My Father, who worked harder than any person I know his whole life…just lost his house and had to move in with my sister and her husband and 4 kids…along with my other 2 sisters. They are living on top of each other. This is UNPRECEDENTED for anyone in my family!
    EVERYONE I KNOW who is out of work is desperately trying to get work! AMERICANS ARE NOT LAZY!!!!
    I am livid!!!!!!

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