Did Obama Further Temper Unemployment Expectations?

Today’s market weakness is being attributed to a myriad of issues, with most profit taking being attributed to added valuation after huge gains not meeting up to the current economy.  But there have been several other issues to consider with President Obama today saying that the economic gains are not enough and that more is needed… “We are just not where we need to be yet. We’ve got a long way to go, “ said Obama.  But more specifically, Obama noted that job losses are likely to continue and called the job growth, or lack thereof, distressing.

Regardless of whether this was just an off-the-cuff comment or whether this was a telegraph to temper any big expectations this soon, a Bloomberg consensus level for unemployment due this Friday is 9.9% for October and a change in non-Farm Payrolls of -175,000 versus 9.8% and -263,000 non-Farm Payrolls in September.  We have also heard on numerous occasions before and during the end of financial market misery from the administration, economists, Fed members, and politicians a warning of unemployment reaching that double-digit level.

The administration and other senior officials, present and past, often get previews on government data and the Labor Department is included in there.  But this is on the heels of this morning’s Institute for Supply Management data showing the first positive reading in all segments and well above projections.  On the jobs side, the ISM said that hiring increased for the first time in over a year now that the October employment index hit 53.1, well above the reading of 46.2 in September.

President Obama did speak before over the summer about a “dip in the unemployment rate” shortly before a surprise drop in the official unemployment rate.  So if today’s comments were just to be taken at face value with other seemingly off-the-cuff remarks before, it seems that the administration may have guided down at least some metrics of what to expect on the official employment data ahead of this Friday’s unemployment rate and in the number of non-Farm payrolls.

This all follows last week’s comments that the first stimulus has directly created or saved nearly 650,000 jobs, and the figures were said to be at least 1 million jobs saved when including the indirect impact of tax cuts.  This figure is one which many dispute or question at best, and that also may be meant to be a tempering of expectations for a return of solid employment yet.

There are already some economists calling for 10% unemployment on Friday’s release.  We have projected double-digit unemployment before year-end for most of 2009.  Hopefully we won’t see a double-digit figure on Friday.  But hoping is generally not a great primary business strategy.

JON C. OGG
NOVEMBER 2, 2009