Double-Digit Unemployment, Now 'When' Rather Than 'If'

Unemployment is said to be a lagging indicator.  Even if we had not been calling for higher rates than this for quite some time, the data on employment is bad enough that you have to wonder just how lagging this reading really is.  The unemployment rate for the month of March 2009 came in at 8.5% and the change in non-farm payrolls came in at -663,000.  Bloomberg had these estimates at  8.5% for unemployment and at -650,000 for the change in non-farm payrolls.  What is interesting is that many economists were hinting that a reading of -700,000 on the payrolls numbers was possible.

The average hourly work week came in at 33.2 hours, which compares to estimates of 33.3 hours and a prior reading of 33.3  hours. Hourly earnings rose 0.2% as expected, at least for those who weren’t fired.

The traditional boost in government jobs was not seen this month, and the huge losses came in temporary, manufacturing, and services jobs in the real economy.  Healthcare was the sole gain with a gain of 13,500 jobs.

An additional revision did not come for February, but the January 2009 reading was revised higher to a payroll loss of 741,000 jobs lost.

There is a silver lining here.  We were braced for a reading of 720,000 before expecting the “freak-out” button to get hit.  We’d still expect this number to get revised to a slightly worse number, but that is just based on a hunch and on history of the Labor Departments so-called computer systems errors.

If this same rate of change keeps coming, the US is going to lose almost 5 million more jobs and unemployment would be well into the double-digits by year-end.  All we can hope is that the slowdown in firings starts to come into play if things in the economy start to see drops that are not as bad as the Depression-trade was indicating just a month ago.

JON C. OGG
April 3, 2009