Economic Notes: Pleasantly Bad News
6/05/2009
Abraham Lincoln told of a man being ridden out of town on a rail, after having been tarred and feathered. The man remarked: “If it wasn’t for the honor, I’d rather walk.” Lincoln’s subject may be unbeatable in finding silver linings in otherwise dark clouds, but the most recent data on labor market conditions offers an opportunity to try.
In May according to the Bureau of Labor Statistics (BLS), the national unemployment rate hit 9.4%, its highest in more than a quarter century. At 14.5 million, the number of unemployed has almost doubled (+92%) since the recession began in December 2007.
Despite finding another three-quarters of a million Americans jobless, the BLS data contain a silver lining – thin though it is. Although the economy lost another 345,000 jobs, this was the smallest drop since last August and less than half January’s. Further, the job losses in March and April were less than initially estimated. This is pleasantly bad news.
If the accelerating trend continues, then there is an increased likelihood that the contraction will end before 2009 does.
Before the corks start popping, however, attention should be paid to the divergence between the number of job cuts reported by employers and the number of workers who report having lost their jobs.
For the past few months, employers have indicated a steady decline in the number of jobs eliminated, but households continue to report relatively high (even rising) levels of job losses. Since BLS derives these data from separate surveys (see: "Snowflakes, Snowballs, and Blizzards"), this may be an anomaly that resolves itself in the coming months.
It bears watching nonetheless. Declining job cuts are good news. But until households stop reporting job losses and experience actual job gains, consumers are unlikely to loosen their purse strings. When they do, however, that will be pleasantly good news.
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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.