Nonfarm payroll employment continued to decline in June (by 467,000), and the unemployment rate increased to changed at 9.5% (with a total of 14.7 million unemployed), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Job losses were widespread across the major industry sectors, with large declines occurring in manufacturing, professional and business services, and construction.
Since the start of the recession in December 2007, the number of unemployed persons has increased by 7.2 million, and the unemployment rate has risen by 460 basis points (from 4.9% to 9.5%). The number of long-term unemployed (those jobless for 27 weeks or more) increased by 433,000 over the month to 4.4 million. In June, 30% of unemployed persons were jobless for 27 weeks or more.
Employment in manufacturing fell by 136,000 over the month and has declined by 1.9 million during the recession. Health care employment increased by 21,000 in June. Job gains in health care have averaged 21,000 per month thus far in 2009, down from an average of 30,000 per month during 2008.
The number of persons working part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed in June at 9.0 million. Since the start of the recession, the
number of such workers has increased by 4.4 million.
About 2.2 million persons (not seasonally adjusted) were marginally attached to the labor force in June, 618,000 more than a year earlier. These individuals wanted and were available for work and had looked for a job sometime in the past 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.
Related: posts on employment – Unemployment Rate Increased to 8.9% – Can unemployment claims predict the end of the American recession? – The Economy is in Serious Trouble – Over 500,000 Jobs Disappeared in November 2008
China Manufacturing Expands a Fourth Month
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China’s economy may keep improving in the third and fourth quarters, enabling the nation to meet its 8 percent economic growth target for this year, central bank Governor Zhou Xiaochuan said this week.
Given the still quite uncertain global economy this is a pretty strong performance. And it is one of the positive indications that we may be recovering from the credit crisis. There continues to be fairly good news in many areas. However we are far from certain to make a decently global recovery even in 2010.
Related: Manufacturing Contracting Globally – Rodgers on the US and Chinese Economies – Manufacturing Cars in the USA – Leading Manufacturing Countries in 2007 – USA Unemployment Rate Jumps to 9.4% – The Economy is in Serious Trouble
Surging U.S. Savings Rate Reduces Dependence on China
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Nouriel Roubini, an economics professor at New York University and chairman of RGE Monitor, forecasts that the savings rate will ultimately reach 10 percent to 11 percent. What’s critical, he said in a Bloomberg Television interview on June 24, is how quickly it increases.
A rapid rise in the next year because of a collapse in consumption would push the economy, already in its deepest contraction in 50 years, further into recession, he said. If it occurs over a few years, the economy may grow.
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From 1960 until 1990, households socked away an average of about 9 percent of their after-tax income, government figures show. Americans got out of the habit in the 1990s as they saw their wealth build up in other ways, first through surging stock prices and then soaring home values, Gramley said.
That process has now gone into reverse. U.S. household wealth fell by $1.3 trillion in the first quarter of this year, with net worth for households and nonprofit groups reaching the lowest level since 2004, according to a Fed report. Wealth plunged by a record $4.9 trillion in the last quarter of 2008.
Edmund Phelps, winner of the Nobel Prize in economics in 2006 and a professor at Columbia University in New York, said it may take as long as 15 years for households to rebuild what they lost in the recession.
As I have been saying the living beyond our means must stop. Those that think health of an economy is only the GDP forget that if the GDP is high due to spending tomorrows earnings today that is not healthy. Roubini correctly indicates the speed at which savings increases could easily determine the time we crawl out of the recession. I hope the savings rate does increase to over 10 percent.
If we do that over 3 years that would be wonderful. But it is more important we save more. If that means a longer recession to pay off the excessive spending over the last few decades so be it. And it is going to take a lot longer than a few years to pay off those debts. It is just how quickly we really start to make a dent in paying them off that is in question now (or whether we continue to live beyond our means, which I think it still very possible – and unhealthy).
Related: Will Americans Actually Save and Worsen the Recession? – Can I Afford That? – $2,540,000,000,000 in USA Consumer Debt (April 2008) – Paying for Over-spending
One factor you must understand when evaluating economic data is that the data is far from straight forward. Even theoretically it is often confusing what something like “savings rate” should represent. And even if that were completely clear the ability to get data that accurately measures what is desired is often difficult if not impossible. Therefore most often there is plenty of question about economic conditions even when examining the best available data. Learning about these realities is important if you wish to be financially literate.
Bigger U.S. Savings Than Official Stats Suggest
A closer look, however, shows that Americans have tightened their belts more sharply than the numbers report. The reason? Official figures for personal spending include a lot of categories, such as Medicare outlays, that are not under the control of households. They also include items, such as education spending, that should be treated as investment in the future rather than current consumption.
After removing these spending categories from the data, let’s call what’s left “pocketbook” spending – the money that consumers actually lay out at retailers and other businesses. By this measure, Americans have cut consumption by $200 billion, or 3.1%, over the past year. This explains why the downturn has hit Main Street hard.
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Finally, for technical reasons the BEA throws in some “spending” categories where no money actually changes hands. The biggest is “rent on owner-occupied housing,” the money that people supposedly pay themselves for living in their own homes. Despite the housing bust, this number rose by 2.6% over the past year, to $1.1 trillion.
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A closer look at BEA numbers shows that Americans reduced spending by 3.1% in the past year, indicating that the savings rate has risen to 6.4%
He raises good issues to consider though I am not sure I agree 100% with his reasoning.
Related: The USA Should Reduce Personal and Government Debt – Financial Markets with Robert Shiller – Save Some of Each Raise – Over 500,000 Jobs Disappeared in November (2008)
Nonfarm payroll employment fell by 345,000 in May, about half the average monthly decline for the prior 6 months, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The unemployment rate continued to rise, increasing from 8.9 to 9.4 percent. Steep job losses continued in manufacturing, while declines moderated in construction and several service-providing industries.
According to the Household Survey Data, the number of unemployed persons increased by 787,000 to 14.5 million in May, and the unemployment rate rose to 9.4 percent. Since the start of the recession in December 2007, the number of unemployed persons has risen by 7.0 million, and the unemployment rate has increased by 450 basis points.
Unemployment rates rose in May for adult men (to 9.8%), adult women (7.5%). Among the unemployed, the number of job losers and persons who completed temporary jobs rose by 732,000 in May to 9.5 million. This group has increased by 5.8 million since the start of the recession.
The number of long-term unemployed (those jobless for 27 weeks or more) increased by 268,000 over the month to 3.9 million and has tripled since the start of the recession.
The civilian labor force at the end of May, 2009 stood at 155,081,000 (at the end of April was 154,731,000) growing by 350,000, employment stood at 140,570,000 down from 141,007,000 the month before. The ranks of unemployed grew to 14,511,000 from 13,724,000.
Related: Unemployment Rate Increased to 8.9% – USA Unemployment Rate Rises to 8.1%, Highest Level Since 1983 – Bad News on Jobs
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A recent Pew poll found that 21% of Americans planned to grow their own vegetables, 16% had held a garage sale or sold things online and 10% had either taken in a friend or relative or moved in with one. Pundits are coining phrases such as “austerity chic” and “luxury shame”. Four-fifths of Americans told the BCG they would defer big purchases that can wait.
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The beneficiaries of the new parsimony are, unsurprisingly, firms that offer low prices. The only two stocks on the Dow Jones Industrial Average that rose in 2008 were Wal-Mart and McDonald’s.
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The hangover from this party will be long and painful. Households’ total outstanding borrowing fell in the fourth quarter of 2008, for the first time since the second world war. The personal-saving rate rose to 4.2% in the first quarter of 2009, from a nadir of minus 0.7% in 2005. “It is easy to see how consumer deleveraging could result in hundreds of billions of dollars-worth of forgone consumption in coming years,” say Martin Baily, Susan Lund and Charles Atkins of the McKinsey Global Institute.
American consumers are burdened by far too much consumer debt. And spending on non-essentials with debt is un-wise and creates personal risks and a weak (fundamentally) economy. It is true the current economic data will look good when people spend money they don’t have. But it just creates a huge burden for the future economy to cope with.
Related: USA Consumers Paying Down Debt – Too Much Personal Debt – $2,540,000,000,000 in USA Consumer Debt
Why Rising Productivity Is Cause for Worry
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But there may be another, less benign, reason for rising productivity. In past downturns, educated professionals have escaped mainly unscathed. This time businesses are relentlessly hacking at their professional workforce—a tactic that boosts short-term productivity while hurting long-term growth. Rising productivity may be a sign of weakness, not strength.
Over the past year the number of employed professionals has fallen by 0.7%, a rare decline. Outside of the still-growing education and health-care occupations, the number of employed professionals has dropped by a dramatic 3.6%.
Cutting productive staff for short term rewards is definitely a negative for long term productivity. My guess is the management ranks are not as productive as the non-management ranks are however. My sense is their is more room to eliminate non-value added activity from management positions which will not harm long term productivity growth.
A good way to improve productivity is to reduce excessive pay for senior executives. As the money wasted on exorbitant pay that senior executives lavish on themselves is reduced the capital wasted on them can be better deployed in ways that will improve productivity.
Related: The Real Threat Is Decreased Productivity – Manufacturing Productivity – Manufacturing Contracting Globally
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Home prices fall by record 19.1 percent in 1Q
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New York still is up 73.4% from January 2000, though down 19.7% from its June 2006 peak. The Detroit index is 29% lower than in January 2000. Detroit home prices are back to their mid-1995 levels.
Phoenix, Las Vegas and San Francisco continued to lead year-over-year decliners, with drops over 30%. Minneapolis led month-to-month decliners, as the rate of decline accelerated there. The rates of decline also accelerated in Boston, Detroit, Las Vegas, Miami, New York, Portland, San Diego and Seattle.
Dallas, Denver, Cleveland, Boston and Charlotte managed to avoid double-digit year-over-year declines. Measuring from each market’s peak, Dallas has suffered the least, down 11.1% from its peak in June 2007; while Phoenix is down 53% from its peak in June of 2006. All of the 20 metro areas are in double digit declines from their peaks, with two — Phoenix and Las Vegas — in excess of 50%.
Related: Home Price Declines Exceeding 10% Seen for 20% of Housing Markets (Sep 2007) – Nearly 10% of Mortgages Delinquent or in Foreclosure – Record Home Price Declines (Sep 2008)
Can unemployment claims predict the end of the American recession? by Robert J. Gordon
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To this point I have examined a single indicator to see if it is useful in predicting the end of recessions without any consideration of what is going on in the rest of the economy. Our conclusion is supported by the fact that previous false peaks occurred when new claims were at 80 to 90% of the level at the ultimate true peak. For the peak of 4 April 2009 to be false by this historical precedent, the ultimate future peak would have to be in the range of 730,000 to 800,000. As the weeks go by, such a sharp future increase in new claims looks increasingly implausible.
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My reasoning leads me to conclude that the ultimate NBER trough of the current business cycle is likely to occur in May or June 2009, substantially earlier than is currently predicted by many professional forecasters.
Interesting points. Time will tell what happens. I am skeptical this measure alone will prove to be perfect but I can believe it will be one useful measure to consider. I tend to be skeptical we are close to a strong recovery. But at what point the economy moves out of a recession is less certain. I still believe we will be lucky if we show job gains by the end of this year.
Related: How Much Worse Can the Mortgage Crisis Get? (March 2008) – Unemployment Rate Increased to 8.9% – Manufacturing Employment Data – 1979 to 2007 – First Quarter 2009 GDP down 6.1% – Poll: 60% say Depression Likely (Oct 2008)
Nonfarm payroll employment continued to decline in April, and the unemployment rate rose from 8.5 to 8.9 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Since the recession began in December 2007, 5.7 million jobs have been lost. In April, job losses were large and widespread across nearly all major private-sector industries. Overall, private-sector employment fell by 611,000.
The number of unemployed persons increased by 563,000 to 13.7 million. Unemployment rates for April for adult men reached 9.4% and for adult women 7.1%. The number of long-term unemployed (those jobless for 27 weeks or more) increased by 498,000 to 3.7 million over the month and has risen by 2.4 million since the start of the recession in December 2007.
The civilian labor force participation rate rose in April to 65.8 percent, and the employment-population ratio was unchanged at 59.9 percent. The employment-population ratios for adult men and women showed little or no change over the month. However, since December 2007, the men’s ratio was down by 440 basis points, while the women’s ratio was down by 130 basis points. Since those that stop looking for work (retire or just stop actively looking) are not counted as unemployed the participation rate is a useful statistic to examine in conjunction with the unemployment rate.
Much of the commentary on the April job losses have been that the decrease in the number of job losses from previous months shows the economy is stabilizing. While it is true losing 611,000 jobs is better than losing 700,000 jobs, losing 611,000 is still very bad. The unemployment rate increased to 8.9% and long term unemployment is increasing drastically. This is hardly good economic news. It is true that there is hope that the economy is turning around, but the employment data we have so far is hardly positive (employment data is a lagging economic indicator so it is not surprising employment data does not recover before other signs point to improvement).
Related: Another 663,000 Jobs Lost in March in the USA – USA Unemployment Rate Rises to 8.1%, Highest Level Since 1983 – Over 500,000 Jobs Disappeared in November – What Do Unemployment Stats Mean?