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.