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Unemployment Report: October 2, 2009

Posted by Larry Doyle on October 2, 2009 8:58 AM |

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

I.  UNEMPLOYMENT RATE
July: 9.5%
August: 9.4%
September: 9.7%
– October Consensus Expectation: 9.8%
October Actual: 9.8%

>> LD’s comments: as expected and only getting worse. The underemployment rate is 17%!! (High five MC). Long term unemployed (those out of work 24 weeks or more) is 5.4 million!!

II.  NON-FARM PAYROLL (click here for definition of this term)
July: initial loss of 467k initially revised to a loss of 443k and now revised to a loss of 463k
August: initial loss of 247k revised to a loss of 276k, further revised to -304k
September: initial loss of 216k, revised to a loss of 201k
– October Consensus Expectation: loss of 175k
– October Actual: a loss of 263k, with revisions to the prior two months of a further loss of 13k jobs.

>> LD’s comments: decidedly worse than expected, this figure shoots a huge hole in the case of those who thought the economy would have a V-shaped recovery. Construction lost 64k jobs. The one sector of the economy that people would expect to support this number is government jobs. This did not happen as government payrolls declined by 53k jobs. This is an indication that cities, states, and towns are cutting payroll and services as tax revenues plummet.

III. AVERAGE HOURLY EARNINGS
July: 0.0%
August: +.2% revised to +.3
September: came in at .3 with the prior month revised to .3 as well.
– October Consensus Expectation: .2%
– October Actual: .1%, also worse than expected.

>> LD’s comment: This number inspires no confidence that the economy can expect a rebound in consumer spending and retail sales anytime soon. Be mindful that the prior month was revised to +.4%. That figure is largely a result of a rise in the minimum wage.

IV.  AVERAGE HOURLY WORKWEEK
July: 33.0 hours
August: 33.1 hours
September: 33.1 hours
– October Consensus Expectation: 33.1 hours
October Actual: 33.0 hours, another big disappointment

>> LD’s comments: this number is a confirmation that businesses see no pickup in new orders. This number may be the most disappointing of all components as it hits directly at what business owners view as the future business climate.

V. FURTHER COLOR
Although many Wall Street based economists, media mavens, and government pundits are reporting these numbers as disappointing, the mere fact is prior reports were reported in a far too ebullient fashion. Our economy is trying to adapt to a lack of credit. Meredith Whitney highlights this fact in today’s WSJ in writing, The Credit Crunch Continues. Expect an increased call for greater fiscal stimulus. The fact is the government programs have largely created safety nets and pulled consumer demand forward while the major structural unemployment issues in the economy loom very large.

VI. MARKET REACTION
At 8:10am:

2yr Tsy:  .87%
10yr Tsy: 3.15%
S&P 500 Futures: -3.2
DJIA Futures: -27
U. S. Dollar Index: 77.22

At 8:50am, Post-Report:

2yr Tsy: .85%
10yr Tsy: 3.14%, we did get as low as 3.10% immediately after the report.
S&P 500 Futures: -12.00, which indicates that the stock market will open up down approximately 1.2%
DJIA Futures: -104
U.S. Dollar Index: 77.30…basically unchanged. Recall that a lot of hedge funds and speculators are short dollars and long a host of risk-based assets. The dollar may improve as those risk-based markets sell off.

Questions, comments, constructive criticisms always encouraged and appreciated.

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Thanks.

LD

  • Larry –

    The underemployment number (U-6) is now 17%. I find it intriguing that none of the mainstream reports/articles about this jobs report that I have seen anywhere are disclosing this number (U-6) in the article. I only was able to find it through blogs who analyzed the BLS report in detail. Did the media decide (or were instructed) not to report the U-6 number anymore?

    The “economy is recovering”/”recession is over” argument just took a major blow with this report.

    Matt

    • Larry Doyle

      Matt,

      Thanks for sharing that number. The pom-poms are being put aside as the reality of the economy plays out. It’s called the truth.

  • fiscalliberal

    They alwas report non farm payroll. Let me tell you what is happening in the dairy industry. Milk a year ago was about $20. a hundred. It is going at $13. per hundred now. Pretty big drop. A lot of people are not able to meet base expenses, forget capital improvements.

    Net impact will be culling of herds (cheap hamburger), equipment purchase defaults and agricultural communities tanking.

    Todays labor report portrays a aneamic Christmas.

    I think a big factor is lack of confidence. Nothing in the financial community is changed. Crooks are not going to jail. Ads on CNBC are talking realestate loans with low rates and reduced qualification criteria. People hear that and pull back.

    • Larry Doyle

      Fiscal…thanks for sharing your insights as to the real economy as opposed to the facade presented by others. What you are presenting is deflationary in nature. How will people respond to that phenomena? Hoard cash as much as they possibly can…and that is exactly what banks are doing.

  • whoisjohngalt

    The company I work for is sending their customer service, order entry and invoicing jobs to an Asian country in January. Cheap internet phone service makes this possible.

  • Aaron Kramer
    • Larry Doyle

      Aaron,

      Thanks for sharing this link. The fact that the birth-death model was not revised in the midst of this recession begs the question as to the integrity of the process and those overseeing it.

      You have highlighted the likely skewed nature of the labor reports due to the inaccuracy and of this model. Now you are vindicated…and you are humble enough not to say, I told you so. Well, you did tell us so. Thanks.

  • Richard

    This is nothing compared when you take cap and trade, climite change and Obamacare bills into consideration. We haven’t seen nothing yet.

    Just wait until the electric bill to charge that electric car doubles or triples and fuel cost are about $8.00/gal for gas, whcih in turn will increase food cost and the taxes that will be placed on businesses in turn passed down to us the cust.






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