Economic Notes: It’s the Jobs, Stupid
11/09/2009
By Patrick O'Keefe, Director of Economic Research, J.H. Cohn
“It’s the economy jobs, stupid.” ~James Carville (updated 1992 2009)
Employment
fell in October for the 22nd consecutive month, but the rate of decline is slowing. The month-on-month drop (-190,000) was about one-quarter (25.6%) of January’s. While it exceeded the consensus forecast (i.e., the group guess), revised data for August and September indicated smaller losses than initially estimated.
Despite the recent deceleration in job losses, the labor market remains exceptionally weak. With 15.7 million unemployed, more than double (+108.2%) the number at the recession’s outset, the unemployment rate (10.2%) is the highest it has been in more than a quarter century.
The average spell of unemployment, almost 27 weeks, is the longest it has been in 50-plus years of recordkeeping. And even among those with jobs, many are unable to find full-time employment; more than 9.2 million workers are in part-time jobs due to economic conditions.
October’s job losses were concentrated in the goods-producing sectors (manufacturing and construction), which provide 14% of all employment but accounted for more than two-thirds (67.9%) of the month’s decline.
Service-sector employment was flat (-0.1%) over the month. Declines in the retail sector and leisure/hospitality, reflecting cautious consumers, were offset by gains in healthcare professional/business services and temporary help.
Government employment was unchanged. State and local governments curtailed jobs (except in education) while the Federal government (excluding the Postal Service) added an equivalent number.
The Institute for Supply Management (ISM) reported that purchasing managers anticipate growth in both the services and manufacturing sectors, but the impact on employment will be mixed. Manufacturers are somewhat optimistic about future hires, but service-sector firms, which account for the bulk of the jobs, are cautious.
As noted last week, the third-quarter gains in Gross Domestic Product (GDP) were largely the result of the fiscal and monetary stimulus. The consequent increase in output (i.e., the number of widgets) has been achieved through rising productivity (i.e., more widgets per worker, not more workers).
If the gains are to be sustained, however, consumer confidence and worker compensation, which have fallen of late, must rise. For that to occur, the economy needs to add jobs – not merely shed them more slowly. If not, consumer spending (70% of GDP) will remain subdued.
In the end, recovery isn’t about more widgets. It’s about more jobs.
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The statements, opinions, and conclusions contained herein are based solely upon the author’s own studies, research, and personal experience. Neither J.H. Cohn LLP nor the author makes any representation or warranty as to the accuracy or completeness of this information. J.H. Cohn LLP and the author expressly disclaim any liability for any loss or damage which may be incurred, of any kind whatsoever, as a result of or arising from the use of any of the information contained herein or reliance on the accuracy or completeness of it.