While job losses of 598,000 in today’s report for January 2009 were more than the 525,000 expected, the number was within the expected range. Evidence of this comes from the increase in long-term treasury yields and stock futures prices immediately after the announcement.
Nevertheless, the number was the largest since 1974 and clearly indicates that the employment market is weak. We have now lost the greatest number of jobs in three months since data keeping began in 1939 – another data point which is telling. The unemployment rate also surged to 7.6%. However, we are nowhere near the bottom. And this headline number is deceiving because an increasing number of Americans are dropping out of the labor force. Expect the headline unemployment rate to surge into double digits before the Depression ends. (Note: I had previously remarked I anticipated the unemployment rate to peak above 9%. I now expect the rate to be much higher than that).
I have noted in the past that when the unemployment level rises more than 1.0% in a year’s time, it has always meant recession. The change in the unemployment rate is a very good gauge of the employment market. According to that measure, the employment market is now the worst since the 1973-1975 recession.
Below is the heart of the U.S. Department of Labor’s employment situation summary accompanying the numbers. I have highlighted the most salient details.
Nonfarm payroll employment fell sharply in January (-598,000) and the unemployment rate rose from 7.2 to 7.6 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Payroll employment has declined by 3.6 million since the start of the recession in December 2007; about one-half of this decline occurred in the past 3 months. In January, job losses were large and widespread across nearly all major industry sectors.
Unemployment (Household Survey Data)
Both the number of unemployed persons (11.6 million) and the unemployment rate (7.6 percent) rose in January. Over the past 12 months, the number of unemployed persons has increased by 4.1 million and the unemployment rate has risen by 2.7 percentage points. (See table A-1.)
The unemployment rate continued to trend upward in January for adult men (7.6 percent), adult women (6.2 percent), whites (6.9 percent), blacks (12.6 percent), and Hispanics (9.7 percent). The jobless rate for teenagers was unchanged at 20.8 percent. The unemployment rate for Asians was 6.2 percent in January, not seasonally adjusted. (See tables A-1, A-2, and A-3.)
Among the unemployed, the number of job losers and persons who completed temporary jobs increased to 7.0 million in January. This measure has grown by 3.2 million during the last 12 months. (See table A-8.)
The number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 2.6 million in January. Over the past 12 months, the number of long-term unemployed was up by 1.3 million. The number of persons unemployed less than 5 weeks rose to 3.7 million in January. (See table A-9.)
Total Employment and the Labor Force (Household Survey Data)
The civilian labor force participation rate, at 65.5 percent in January, has edged down in recent months. The employment-population ratio declined by 0.5 percentage point to 60.5 percent over the month, and by 2.4 percentage points over the year. (See table A-1.)
The number of persons who worked part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged in January at 7.8 million; however, this measure was up by 3.1 million over the past 12 months. Included in this category are persons who would like to work full time but were working part time because their hours had been cut back or because they were unable to find full-time jobs. (See table A-5.)
Persons Not in the Labor Force (Household Survey Data)
About 2.1 million persons (not seasonally adjusted) were marginally attached to the labor force in January, about 400,000 more than 12 months earlier. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Among the marginally attached, there were 734,000 discouraged workers in January, up by about 270,000 from a year earlier. Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The other 1.4 million persons marginally attached to the labor force in January had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities. (See table A-13.)
You should also note that the seasonally-adjusted (SA) data is under-representing the decline in employment by a wide margin. This is a trend I noted with the jobless claims numbers as well. If we look at year-on-year changes in employment levels, there were 4.061 million more people unemployed in January 2009 than in January 2008 on a seasonally-adjusted basis. However, if one looks at the unadjusted (NSA) number, this comparisons weakens to 4.788 million. That’s a gap of 18%, which is enormous. The gap of 727,000 is unprecedented.
I read this to mean that the unemployment numbers will weaken more than is now expected as the seasonally-adjusted numbers play catch up.
Sources Employment Situation Summary – U.S. Department of Labor
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Originally published at Credit Writedowns and reproduced here with the author’s permission.