The jobs data isn’t getting better, and in fact is getting worse. The Labor Department has issued unemployment as being 6.1% in August, while consensus estimates were calling for a 0.1% increase to 5.8%. This was the highest unemployment rate since 2003. The non-Farm payrolls also came in at -84,000 rather than the -75,000 expected by economists. If you want some extra salt on that wound, the prior July number was revised to -60,000 from -51,000. It gets worse. June’s 51,000 drop was revised -100,000 jobs. Average hourly earnings are not keeping up with inflation either. Hourly wages rose a whole 0.4% to $18.14.
Just yesterday we identified companies which might lay off 10,000 employees as the conditions continue to weaken. By our calculations this translates to roughly 600,000 job losses since the start of 2008. If you take the current conditions and look at the trends going to an extreme, then all of a sudden 7% to 8% unemployment at the peak of the problems is becoming a possibility rather than just a bad dream. With the declines in autos, airlines, manufacturing, construction, retail, banking, and brokerage firm jobs, we could be facing nearly 1,000,000 jobs destroyed in 2008. And, that does not take into account the number of small businesses that will have to cut personnel because they have no access to credit.
Guess where the gains were. Healthcare and education rose by 55,000 jobs. The government added 17,000 jobs. If you keep backing those out this is getting worse and worse. Thank heavens the government keeps telling us there is no recession. It’s just a recessionless recession.
Anyone hoping that the jobs data was going to help markets is in for another disappointment. DJIA futures were down 60 points and are now down triple digits again. 10-Year T-Note yields are down another 0.05% to under 3.60%. If you were worried about the FOMC raising rates ahead of the election you can rest easily now. The FOMC is likely going to be out of the rate hiking game until 2009.
Jon C. Ogg
September 5, 2008
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