Employment Thursday

It was likely to happen sooner or later, Initial claims rose for two weeks running. Last week they rose from 454k to 473k, and this week they came in at 480k. There is an indicator that this is not cause for alarm though: The 4-week moving average (often used with this number to smooth out the fluctuations) decreased this week from 473k to 468k. This decrease is due to a much higher initial claims number 5 weeks ago. Long story short, this isn't good news, but it isn't bad enough to fret over.

I posted the Krugman article a few days back and actually got some reaction over it. Krugman's estimates that we need 300k job creation a month may seem unreachable, but you should consider the mechanics of the job market. Just as high unemployment leads to lower wages, job creation leads to more job creation. Basically, more people with jobs = more people spending money = more demand for products/services = more demand for labor to fulfill that demand for products. Because of this cyclical behavior, the job market actually follows more of an exponential growth pattern, see depiction below.



What this means is that its ok for us to see modest job growth in the short run, so long as it's growth.

Consumer Inflation

Catastrophe averted. Consumer Inflation rose by a slightly elevated .4%, mainly due to increases in the price of fuel. The Core Consumer inflation (excluding food and energy) came in at 0.0%. The increase in prices at the producer level could show itself in next months report (it makes sense that there could be a lag) but we'll have to wait and see. At the very least, we won't see contractionary monetary policy before Christmas.

Return to business

It's been nearly two weeks since my last post. Things just got kind of crazy. I'm back now, so lets look at the things that happened while I was away.

First the good news, Retail Sales came in very strong. I wish I had a graph to show how retail sales behaves during recessions, but unfortunately I don't. They change the way they measure retail sales so often that it's nearly impossible to put together that kind of a graph. Using the current system of measurement, this is what Retail sales looks like:

With this release, we have enough data to call this a trend. Businesses should be using these numbers to make hiring/firing decisions this spring.

The other good news came out this morning. Industrial Production (a.k.a. manufacturing) is up again. While this signals good news for manufacturers (and their workers), it also reinforces one of the strongest indicators that we wont fall back into a recession. The Capacity Utilization report is part of the Industrial Production release. It came in positive, and take a look at the graph (especially in relation to other recessions, indicated by the grayed areas):

Only once did capacity utilization increase and then fall again during a recession, 1982-83. We have seen a much more significant rise than the 82-83 false signal. What this report shows is two-fold: we are likely getting better, but things are worse than they've been since this report has was started in the early 70s.

Now for the bad news, and I'm afraid it's really bad. Inflation reports for producers came in today significant above what they should be. To give you some scale, if you annualized the raw data producers would see a 21.6% yearly inflation rate (it came in at a 1.8% monthly rate). The core (excluding food and energy) came in at a much more manageable, but still elevated .5% monthly rate (annually 6%).

The produce inflation rate is subject to wild fluctuations, and one data point does not make a trend. Take a deep breath because this could just be a number of coincidences that go away next month, but seeing an elevated consumer inflation rate tomorrow is about the worst thing that could happen right now.

Let me paint a picture for you to explain what will likely happen with an elevated consumer inflation report tomorrow. The Federal Reserve transitions from "Want money? Take it interest free!" to "Price Stability is our chief concern." Markets will crash. The Federal Government attempts to pick up the slack, but its spending not only creates deficit problems (further lowering the value of the dollar) and borrowing problems (lenders begin to question whether the Government will honor its debts) but its spending causes crowding out of private investment (their spending increases demand, which in turn increases price, lowering private spending). The Fed and the Government do policy battle.

You see, according to the Fed we are no longer in a recession. They are happy to help out the recovery, so long as it doesn't impact the only number they truly care about, "Price Level." Now that that number is threatened, don't count on unconditional Fed support.

If you think that I'm exaggerating, take a look at 1932-1938. The exact same thing happened. They were actually in recovery, the Fed returned to its pre-recession stances, and, voila, another recession. Definitely expect a post tomorrow.

I won't really talk about jobs until Thursday, but I wanted to post something. I typically despise Krugman. I could rant for quite a while about all the problems, but suffice it to say, he and I don't typically see eye-to-eye. That being said, he put out a great summary of the employment situation going forward. (To see the post on his site, go here)

"It was truly amazing the way last week’s employment report was hailed by many people as a sign that our troubles are over. Here we are, having suffered huge job losses, and needing to make up the lost ground — and a report showing that we’re still losing jobs, but not as fast, is grounds for celebration?

Anyway, I thought it might be useful to create a sort of benchmark for the level of job growth that would really count as good news. I start from the fact that we’ve lost about 8 million jobs since the recession began — that’s the official number plus the preliminary estimate of the coming benchmark revision. I then take EPI’s estimate that we need to add 127,000 jobs a month. EPI points out that when you put these numbers together, they say that to return to pre-crisis unemployment within two years we’d have to add 580,000 jobs a month. That’s not going to happen.

But let’s set a more modest goal: return to more or less full employment in 5 years –which means seven lean years of depressed employment. To keep up with population growth over those 7 years, the United States would have had to add 84 times 127,000 or 10.668 million jobs. (If that sounds high, bear in mind that we added more than 20 million jobs over the 8 Clinton years). Add in the need to make up lost ground, and we’re at around 18 million jobs over the next five years — or 300,000 a month.

So that’s a useful benchmark. Even if we add 300,000 jobs a month, we’re looking at a prolonged period of suffering — a huge cost from the Great Recession. So that’s kind of a minimal definition of success. Anything less than that, and it’s bad news. It sort of puts that wonderful report that we only lost 11,000 jobs in perspective, doesn’t it?"

Evaluating the Recession Clock (with end of week reports)

Today we got the employment report for November. It would appear that we are at (or near) a stagnation point in employment. Total Nonfarm Payrolls decreased only 11k (a 125k-150k decrease was expected). The unemployment rate (which is more of a psychological thing, as other measures better explain the employment situation) decreased to 10%. Take a minute to celebrate before realizing that this is still double digit unemployment at the height of retail seasonal employment. If this holds through January, it will be significant.

Factory orders came in today with a .6% increase. This growth reinforces numbers we've already seen showing that private demand for nondurable goods is on the rise.

As cynical as I am about the "good news" in employment, the trend of increased demand for nondurables is really promising. For now I'm holding the recession clock at 3 minutes.

Next week we get retail sales numbers for November, if these come back strong I will likely adjust the recession clock again.

Employment Thursday

Well, It would appear that the positive readings from last week were more than just an anomaly. This week's initial unemployment claims came in at 457,000, down from last weeks 466,000. The rule of thumb is that the 350k-450k range means stagnation in employment (as opposed to 450+ which is contraction). However, with most of the seasonal employment already hired and seasonal firings yet to come (in January), I don't know if this will hold.

Another thing that gives me pause is that the recovery seems very uneven. What I mean by that is the Fed released their "Beige Book" yesterday. The Beige Book contains reports on economic conditions from each of the 12 branches of the Federal Reserve. While the macro aggregate numbers are beginning to turn positive, the trend primarily represents scattered strength. One industry is strong in one area, another in another area. Very few things are strong nation wide. I don't know if this will have any significance, but it's worth mentioning that sometimes things can get lost in nationwide data.

Return from Thanksgiving

I went ahead and skipped the end of last week in observance of the holiday, but now I'm back. Despite my absence, we had a number of releases on Wednesday of last week (a few were moved up from Thursday—thanksgiving). November 25 releases included personal income, personal spending, Personal Consumption Expenditure Prices (alternate measure of inflation), Initial Claims, Durable orders, Michigan Sentiment revision, and New Home Sales. Before I begin breaking these releases down, I want to say that this is the first time I'm optimistic about the future. It's not that any one of the releases is positive, but that the entire set is positive.

Starting with personal income and spending, this is generally a rather unimportant release. This may seem counterintuitive, but consider that all month we get releases that form the components of this one. Most of the time when this release comes out, it merely summarizes what we already know. However, this report shows personal income growing at twice the rate expected (.2% rather than .1%) and personal spending growing at .7% (up from last months -.6%). These numbers are great news.

Personal Consumption Expenditure (also PCE) is an alternative measure of prices. The traditional measures, CPI and PPI, watch the prices of a basket of goods. PCE measures prices based on what people are buying. It doesn't break down prices changes into different parts like CPI and PPI do, but it more properly weights the effect of certain changes on people's lives—who cares if the price of a typewriter increased 300% in october, does that really affect your price level? The PCE reading came in at .2%, in line with a 2.4% annual inflation rate. This is a solid number, and the level that the fed typically aims for.

Initial Claims dropped to 466,000, much more than expected. This is a huge movement and puts us within spitting distance of the 450,000 marker that signals stagnation (rather than contraction). This is unbelievably good news.

The Michigan Sentiment Revision (an alternate measure of consumer confidence) came in at 67.4 an upward revision of this month's earlier number of 66, and again more than expectations. However, even with the revision, this month's number is a decrease from last month's 70.6 and September's 73.5. That being said, the revision is about as good as we could have hoped for with this release (revisions rarely to never vary much from their preliminary).

There's not much to report in the housing market, other than sales are continuing. Existing Home Sales (out last Monday) and New Home Sales (out last Wednesday) both showed increases, and both beat expectations. It's likely there is a fair amount of noise in this number due to the housing tax incentive expiration (it has now been extended).

The last piece of information released last week is durable orders. In October durable orders fell -.6%. While on the surface this is bad news, if we pull apart the data we find a silver lining. Durable orders consists of 2 parts: Defense orders and Nondefense orders. The significance is that defense orders in no way represent consumer demand for durable goods. This release had new defense orders down 18.4% and new nondefense orders up 1.2%. While this isn't as good as a positive overall (which would be good news from manufacturers and consumers), this is a good release for consumer demand.

In conclusion, people are making more and spending more, the housing market may be stablizing, employment is showing signs of quickly leveling off, inflation is still well under control, and to top it all off releases exceeding expectations means that the recovery is moving faster than the market had expected—we are likely in for steady increases in the market in the upcoming future. I don't want to be overly bullish, but it's hard not to smile when the data comes in this good.

Since I didn't review it last week, I'm moving the recession clock to 3 minutes to midnight.

Consumer Confidence

Consumer confidence for November increased from 48.7 to 49.5. The direction of the move is good news, but it's still below September and August's numbers (53.4 and 54.5). We could be in for a very rocky holiday sales season.

GDP release

The Bureau of Economic Analysis released the GDP report for the third quarter today. It breaks down growth into categorical components.

First, the good news. GDP increased at an annual rate of 2.8 percent in the third quarter. This included increases in lots of sections:
-Equipment and Software increased 2.3 percent
-Real Personal Consumption expenditure increased 2.9 percent
-Real residential fixed investment (houses) increased 19.5 percent (inflated due to tax incentive)

Now, the bad news. Motor vehicle output added 1.45 percentage points to the overall number, and now that the cash for clunkers program is over that is going to disappear. Plus, we can't discount the impact that the cash for clunkers program has had on other industries (car dealer makes money, buys things, others make money, buy things, etc.) We also saw a decrease in real nonresidential fixed investment (business investment) of 4.1 percent

Two pieces of information that hurt the numbers, but are good signs:
-Net Exports is decreasing: increases in both exports and imports, but imports increase is larger
-Inventories are decreasing: When inventories increase, it adds to GDP (as though the company purchased them). However, decreasing inventories shows that in the big picture people are buying more than is being produced. It signals likely increases to come in employment.

Last, actual federal government spending increased 8.3 percent. Take this how you will: it definitely helps the economy, but it is unsustainable and may distort markets away from their efficient equilibrium (i.e.- building a "green energy" industry, despite the lack of a supportive market).

Finally, the analysis. This release looks like a mixed bag, maybe even beginning to look positive. December's numbers will tell us a lot.

Evaluating the Recession Clock

Wow, what a week. I wish I could tell you that the information we've gotten amounted to something, but I can't. We aren't any closer to moving in a positive direction, but in a glass-half-full kind of way, we aren't any closer to things getting worse. The positive releases continue to be offset by negative releases, so I'm keeping the recession clock at 2 minutes to midnight.

For details on why the data we received doesn't really tell us anything, see my previous post. Suffice to say there is a lot of noise in the economy. Many numbers are moving in the right direction, but may not be doing so for the right reasons. We should see less tainted information soon.

I'm still watching the housing market. At the beginning of next week, we'll get numbers for existing home sales. In my opinion, this is the money number: it represents demand for housing. It's been improving over the last few months, although that could be in large part due to first-time home buyers taking advantage of a fairly significant tax incentive. The incentive should expire Nov. 30, so expect a drop off, but I think the December numbers will exceed expectations.

I see no reason to describe the employment situation anyway other than bleak; again, see my previous post for more information. More and more, employers are finding ways to produce without as many employees. GDP is growing (and we'll get preliminary numbers next week on how fast) but lots of workers who lost jobs still haven't gotten them back.

Analysts talks about the "fundamentals" of the economy quite a bit, although I doubt many of them know what these are. The "fundamentals" is an abstract group of numbers comprised of Consumer Spending (via permanent income hypothesis-see note at bottom), Inflation, and Stability (and borrowing ability) of businesses.

The fundamentals are not strong right now. Consumer Spending is down, except for the spending artificially induced by the Federal Government. Businesses are facing poor sales numbers and tightening lending standards. Inflation is where we want it, but this isn't good news, it's just not bad news.

I'm hoping for better information for Christmas.

Note: The permanent income hypothesis argues that consumer spending is dependent not just on their current income but on the income of their foreseeable lifetime. It clashes with Keynesian philosophy which says that current income is all that matters. Consider the example: a person is given a sizable bonus at work. The permanent income hypothesis argues that this would increase spending but not by as much as an equivalent increase in salary. Keynesian philosophy argues that a bonus would change spending by the same amount as an equivalent change in salary.

Under the permanent income hypothesis, you also look at the existing value of assets. So if an asset like a house decreases in value, the person behaves as though there was an equivalent decrease in his permanent income.

Think of the permanent income hypothesis like linking current spending to your foreseeable lifetime's monetary net worth. It takes into account everything you make and everything you own.

Employment Thursday and Catchup

Since Monday there have been lots of economic releases. Normally each would be covered in it's own post when it came out, but none of these releases gave us significant information.

On Tuesday and Wednesday we saw Producer and Consumer Inflation numbers, Industrial Production, and Housing Starts. The inflation and industrial production numbers were uninteresting in that they were skewed by the Cash for Clunkers program that just ended. However, it appears that the effects of that may now be over, meaning we'll see some accurate information coming soon.

Housing Starts is not that interesting because, again, it is expected. Until we see housing inventories start to deplete (or Existing Home Sales start to increase), don't expect people to build new homes.

The initial jobless claims number stayed roughly constant, coming in at 505,000. I'm trying to find the foothold that will pull us out of a recession, so much of my analysis is optimistic. However, this number more than anything else should tell you things are bad and getting worse. 505,000 people lost their jobs this week and are looking for work, and while many will find new jobs, many will not.

If nothing else in this post sticks, take away this: recessions are not timed events. Something always causes a recession: 1930s it was bank defaults (yes, not the stock market crash), 1970s it was the oil crisis, 1980s it was the Fed combating inflation, 2001 it was 9/11, and our current one the housing bubble. By the same token, something always causes a recovery, history just doesn't take as much note. Businesses and Consumers don't just say "OK, it's been 9 months since the start of the recession. Let's start spending again."

All too often, analysts put recessions in terms of timing, comparing it to other recessions. This isn't like other recessions. Until one market picks up, we will stay in a recession pattern. That is why it is so important to look at all the markets, success in one will indicate coming success in all the others.

Side Note: I read that congress is finally starting fear that the job market won't recover before elections. This is cause for panic, much more than the job situation. Call me a skeptic, but I'm actually cringing at the thought of a group of people, who know nothing about economics, attempting to craft a spending bill to "create jobs".

October Retail Sales

October's retail sales numbers are out, and the news is good. Retail sales posted a better than expected 1.4% gain. Retail sales numbers generally follow pro-cyclically with recessions, so this increase is a very good sign.

We had seen a drop in consumer sentiment not too long ago that I feared would show in retail sales numbers. While that drop wouldn't have had its full effect until November's retail sales numbers came out, a strong showing in October is a very good sign.

Breaking down the numbers we see some interesting trends. Retail sales only includes sales of goods (not services) which is less than half of total consumption. Pulling auto sales out of this number, we only saw a .2% growth—less than September's .4% and far less than August's 1%. What's interesting is that the Cash for Clunkers program has ended, yet we still see growth in the auto market.

All-in-all this is a great news. Regardless of the size of the increases, retail sales have established a clear upward trend.

Evaluating the Recession Clock

Not much has changed since last week. For the time being, I will hold the recession clock at 2 minutes to midnight.

Consumption:

The University of Michigan releases a monthly Consumer Sentiment Survey. The release for November saw a drop when a rise was expected. This underscores a disconnect between academics and people. For an academic, the most important economic numbers involve GDP and output, but for the standard person, the most important number is unemployment. Academics have declared the recession over, but until people can feel secure with their jobs, the standard person will see the recession as ongoing.

A drop in consumer sentiment is particularly bad right now. Retail stores are expecting higher sales than last year, and many forecasters are watching holiday retail store numbers to determine their projections, investments, and lay-offs for the next few months. If people are worried about the economy, they will spend less, and we are in for a bumpy road.

Investment:

Businesses and consumers got bad news for lending/borrowing this week. Interest rates remain low, but banks are continuing to tighten lending standards.

A bit of good news though: Housing prices may have bottomed. We don't have enough data to even establish a trend yet, but it is the first glimmer of hope in that market in years. A recovery could easily get people spending money again and pull us out of this downturn, but don't expect it to be quick.

This week we have some potentially very good news mixed with some more-of-the-same bad news. I still think that things could get worse before they get better, and bad holiday sales numbers would make things a lot worse. I put the risk of falling back into recession at very high.

Employment Thursday

The number of initial unemployment claims was 502,000 a decrease of 12,000 from last week. This brings the 4 week-moving average to 519,750.

We are seeing regular and consistent downward moves of this number with every release. While it is still in the "losing jobs" side, we could see that change very soon.

If we look at the Unadjusted Data in the report, we see that the economy is improving in patches. Wisconsin, Illinois, Michigan, and Texas actually saw the largest increases in initial unemployment claims. California, Florida, Georgia, New York, and North Carolina saw the largest decreases in initial unemployment claims.

In the spirit of prediction, I expect employment will level off in the next 3-6 months (anywhere from mid January to mid April). I don't expect to see job growth before 5 months from now (March), and it could be as far off as a year from now.

Bad News for Lending

The Federal Reserve released The October 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices on November 9th. In short, a bad situation is getting worse.

Over the last 3 months, domestic banks have indicated that they have continued to tighten lending standards on all major types of loans to businesses and households.

The overall theme of the report is that a smaller portion of banks reported lending standards tightening then in previous surveys. However, the reasoning behind this is glossed over: some banks could be seeing a recovery or those banks could just be stumped as to how to tighten standards further. Both would create these numbers, and each has a significantly different outcome.


For those interested in a little light reading, the document is available here: http://federalreserve.gov/boarddocs/SnLoanSurvey/200911/

The document had one piece of interesting news. Apparently, Demand for residential mortgages may be turning around.
While this is only prime loans, we have a couple of quarters of positive data. This is very good news for housing, and a strong indicator that we may have hit a bottom for housing prices.

Evaluating the Recession Clock

I'm setting the recession clock to 2 minutes to midnight.

Most economists now agree that we've come out of the recession. US GDP increased at an annual rate of 3.5% in Q3 (although that is a preliminary number). But it's important to examine why the economy grew. In Q3, we are seeing the combined effects of a large number of federal stimulus packages, continuing record low interest rates, expectations of record high government spending in the future, and the Cash for Clunkers program. While government spending can help push an economy up temporarily, consumers need to spend to sustain that level in a more lasting way. We will see whether the US consumer can make up the difference in Q4.

Let's break down the Components of GDP (Demand Side):

Consumption:

Things had been looking up for consumption, but remember that this number was heavily influenced by the Cash for Clunkers program. Now that the program has ended we'll start to get some more accurate readings on consumer spending. Here is the graph for consumption spending (measured by PCE):

Investment:

Business investment is down and still falling. While it is unsurprising since businesses rarely invest heavily during recession times, it is discouraging given the historically low interest rates. Also, Business investment should be one of the first indicators to tip up after a recession. If consumer spending projections increases, businesses will try to capitalize on the still low interest rates. Business's reluctance to invest could be a indication that they expect lackluster sales for an extended period of time.

Businesses may also be holding off investing because they don't foresee interest rates rising in the future—ergo, they can prolong a decision until they have better information and suffer no ill side effects. Consider the irony, the Fed's insistence that it will hold to an expansionary policy for "an extended period" is encouraging companies to procrastinate investing.

Here is the graph for Business Investment:

Residential Investment reports on the other hand are actually positive. It could just be a one month anomaly. It could be that housing has finally hit a bottom. In Q3 real residential fixed investment increased 23.4%. If this trend continues, it could provide the foundation for a strong recovery. Income and spending theories tell us that as home values increase, consumer spending increases. That being said, it is way too early to tell if this is will happen. We'll keep our eyes on it. Here's the graph:

I'm going to skip over Government Spending. In short, they're spending a ton of money and they've promised to spend even more. That being said, at this point in the economy, whether we fall back into a recession or move on to a recovery and expansion will have little to do with government spending and everything to do with the other components.

Net Exports:

After a rally in November 2008 and again in February-March 2009, the dollar's value has fallen consistently. Consider the chart:

With the devaluation of the dollar, theory would tell you that exports would increase and imports would decrease. Net exports has increased, but it's in spite of exports, not because of it. Again consider the graph:

The increase in Net Exports is more a reflection of the US consumer's reluctance to spend than anything. Despite the positive impact this has on the GDP readings, I consider this very bad news.

Overall, I think we're at a tipping point. If home prices continue rising it will help, but that will take months to have any significant effect. If the consumers can pickup and start spending and businesses start investing, we could start to see the light at the end of the tunnel. However, the shaky employment picture is discouraging spending, and the promise of low interest rates tomorrow is discouraging lending. I put the risk at falling back into recession at very high.

Employment Situation

Well the October Employment Situation report is out, and it's a mixed bag. On the one hand, nonfarm payrolls—one of the key indicators of employment— fell by a smaller amount than expected. On the other hand the unemployment rate rose by a larger than expected .4%. As it

stands now we have 10.2% unemployment, the highest number since 1983.

From the report:

"Total unemployed, plus discouraged workers, plus all other marginally attached workers, as a percent of the civilian labor force plus all marginally attached workers is 11.6%" an increase of .5% from September.

"Total unemployed, plus al marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force is 17.5%" an increase of .5% from September.

One of the most troubling numbers is that manufacturing lost 61,000 jobs in October. Take a look at this graph of manufacturing employment.

Manufacturing employment has clearly dropped dramatically. Over the past four months job losses averaged about 51,000 a month (from October 2008 to June 2009 it averaged 161,000 a month).

I spoke previously about manufacturing leading the way out of the recession. If job losses in the sector begin to accelerate again, we could be in for another dip down the road.

Employment Thursday

For the week ending Oct 31, seasonally adjusted initial claims was 512,000, a decrease from 532,000 the previous week. The 4-week moving average was 523,750, decreasing 3,000 from the previous week's average of 526,750.


While the direction of the move is good, we've still got a lot of ground to cover. At the current level, employment is still shrinking. We want to see this number dip below 450,000 before things will even level off.

Highlights from The Bureau of Labor Statistics September employment picture (Release in early october) show:
"Total unemployed, plus discouraged workers, plus all other marginally attached workers, as a percent of the civilian labor force plus all marginally attached workers is 11.1 " an increase of .1 from August.
"Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers is 17.0" an increase in .2 from August.
Of course the logical jump is that about 5.9% of the civilian labor force is "employed part time for economic reasons."

Today the preliminary productivity release for Q3 came in at a whopping 9.5%. This is bad news for the unemployed. Since the recession started, in addition to cutting jobs due to decreases in output companies have been cutting jobs they see as unnecessary. The increase in output brings us back to about the level we were at in Q4 2005, but with significantly less labor. The question we need to ask is: Is this increase because workers are currently overworked or were companies employing too much labor in 2005?

While things are beginning to improve, the overall outlook for employment is pretty bleak. People are still losing jobs and still having trouble finding jobs. Traditional economic theory tells us that unemployment is a lagging indicator, meaning that although the economy may be beginning to look up employment may be suppressed for some time.

Also, consider the ways in which this recession is different from other recessions. While other recessions impacted manufacturing jobs the hardest with only minor impact to services, this is not the case with this recession. Take a look at this graph:


Typically recessions come to an end with manufacturing "leading the way"—largely due to manufacturing's sensitivity to interest rates. After manufacturing picks up, employment steadily begins to rise. It is unclear whether this pattern will hold true following this recession. The elevated job losses in the services sector may cause serious problems for employment down the road.

Tomorrow we'll see Nonfarm Payrolls and the Unemployment Rate for October.