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Unemployment Report: September 4, 2009

Posted by Larry Doyle on September 4, 2009 9:14 AM |

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

Unemployment Rate
June: 9.4%
July: 9.5%
August: 9.4%
September: 9.7%!!

>>LD’s comments: higher than the expectation of 9.5%. Recall that the rate moved down last month from 9.5% to 9.4% as the labor pool shrunk. This move higher puts the rate back on the track it previously held and would project to a likely double digit unemployment rate in the 4th quarter.

Where’s the stimulus? Where are the jobs? Bulls would say the employment situation is stabilizing. Pragmatists look at the numbers and see an economy settling in to a likely low growth path at best.  The unemployment rate of 9.7% is the highest since 1983. The underemployment rate of 16.8% is very sobering!!

Non-Farm Payroll (click here for definition of this term)
June: loss of 322k
July: loss of 467k initially revised to a loss of 443k and now revised to a loss of 463k
August: loss of 247k revised to a loss of 276k
September: loss of 216k

>>LD’s comments: Close to consensus, but the prior two months had revisions showing further declines of 49k. (The prior month was revised from a loss of 247k jobs to 276k. July was revised from a loss of 443k jobs to 463k jobs). Manufacturing lost 63k jobs, government showed a loss of 18k jobs with more of these at the state level.I repeat my comments from above. We are not witnessing any inclination by private companies to start the rehiring process. As such, the likelihood of long term structural unemployment is growing. This fact will serve as a real drag on consumers in general and the economy as a whole.

Average Hourly Earnings
June: +.1%
July: 0.0%
August: +.2% revised to +.3
September: came in at .3 with the prior month revised to .3 as well.

>>LD’s comments: Largely due to the increase in the minimum wage. Do not look at this increase as an indication of potential growth in retail sales.

Average Hourly Workweek
June: 33.1 hours
July: 33.0 hours
August: 33.1 hours
September: 33.1 hours

>>LD’s comments: as expected the average hourly workweek remained unchanged. This number, which remains mired at a level last seen in 1964, is an indication that an expected rebuild in inventories is not on the near term horizon.

Further Color: the economy remains significantly challenged. Despite all of the government stimulus and government programs, in my opinion the economy is very vulnerable. Behind these numbers, the consumer is seeing few signs of improvement in the jobs space. That reality is impacting the sluggish retail sales along with the continued increase in delinquencies and defaults on the credit front.

Market Reaction: futures have been bouncing up and down post-report. Prior to the report, equity futures indicated a slightly positive opening to the equity market. Now the futures are closer to unchanged.

Interest rates have also bounced around, but the front end of the yield curve seems better bid as the unsettledness behind these numbers makes investors nervous.

The dollar index is somewhat improved but not in a meaningful fashion.

Add it all up and I see the following:

>> the cheerleaders can put away the pom-poms

>> the pure doom and gloom guys who have been short forever remain frustrated

>> the economy remains challenged and will bump along the bottom. No “V” recovery, but more like the “caterpillar” designation assigned by our Sense on Cents Economic All-Star Bob Rodriguez.

Get used to it because it is not going to change appreciably anytime soon.

I repeat my market call from the other day in which I believe equities will retreat from current levels.

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  • Petricone456

    If you look at the civilian labor force’s aggregate size in the August payroll report (154.6mn people) it actually shrank over the year-ago period (a decrease of 0.2%). This is the second time it has shrank in the past year. So what, right? Prior to these two contractions this year there hasn’t been a year-over-year contraction in any monthly non-farm payroll report since the early 1960s. Now maybe this signals the slack in the labor market has reached its peak, but if you look at the number of discouraged workers (people out of work that want a job but are not included in the labor force) it has skyrocketed to just under six million people. To add perspective, this number usually hovers around four to 4.5 million people. In the early 1990s when Bill Clinton inherited an economy coming out of a small recession this number was about seven million people. If this current crisis is worse, could we get to north of seven million discouraged workers? I say why not. A growing number of discouraged workers means that there are fewer people considered part of the total labor foce. Why is this important? A growing number of discouraged workers signifies a shrinking labor force. The labor force is the denominator in the unemployment rate equation and if that number continues to shrink as the numerator (the number of unemployed) grows we’ll see 10% unemployment in no time.

  • Aaron Kramer

    The Birth Death add in is 188K jobs this month. It is about 25% greater than the add in from 2008. The books are aggressively being cooked in order to establish some sort of confidence. Many people are doubting the BLS and this could lead to serious issues if/when inflation returns especially in the bond market.

  • Larry Doyle

    Aaron…great insight. Thanks for adding. The reporting of numbers is clearly being ‘managed’ but the real economy on Main Street can’t be faked.

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