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October job report | Unemployment hits 10.2%
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Whereas last week politicians, pundits, Wall Street and economists heralded headlines touting 3.5% growth in GDP and 640,000 jobs created by the stimulus package, unemployment reports continue to be the wet blanket stifling economic recovery on Main Street. Today’s job report indicates more of the same.
In October the nation's unemployment rate rose above 10% for the first time since 1983, a much worse jump than expected as employers continued to trim jobs from payrolls. Economists had forecast an increase to 9.9%.
According to the Labor Department there was a net loss of 190,000 jobs in October, an improvement from a revised estimate of 219,000 job losses in September. This was the 22nd straight month of job losses.
Government efforts to staunch job losses have had minimal success, though the Obama administration estimated that 640,000 jobs were created or saved by the federal stimulus package. That number has been disputed, but regardless it is modest compared to the 7.3 million jobs that have been lost by the economy since the beginning of 2008.
From CNN Money (excerpt): Jobs are known as a trailing or lagging indicator, meaning that they change in response to other economic events, rather than predicting changes the way a leading indicator, such as the stock market, does. That's because even after a recession has ended, employers are slow to add staff until they're sure that demand has returned.
According to a survey by the National Association of Business Economics, the consensus forecast of 44 top economists is for an addition of only 12,000 jobs a month in the first quarter of next year.
The economists surveyed also indicated they don't expect monthly job gains to top the 150,000 level -- which is generally thought of as what is needed to keep pace with population growth -- until the end of 2010.
And in the most troubling sign, more than a half of the economists surveyed said they didn't expect a recovery to pre-recession levels in the job market until 2012 while a third said they didn't believe a full job recovery would occur until 2013 or beyond.
The auto industry, construction and finance sectors were major employment engines heading into the recession, responsible for one job out of every 11 in the country. But they have all gone through major shifts.
Together, those three industries have shed 18% of their work force since the start of the recession. By way of comparison, the remaining sectors in the economy have only lost 4% of their workers.
Today's job report comes one day after Congress voted overwhelmingly to extend unemployment benefits by up to 20 weeks. There are now a record 5.6 million people who have been unemployed for six months or longer, as the average time an unemployed person has been out of a job hit 26.9 weeks. A million Americans are expected to run out of unemployment insurance benefits at the end of the year.
The new unemployment legislation gives 14 more weeks of benefits to the nation's jobless. A additional 6 weeks of unemployment compensation will be provided to individuals in states with an unemployment rate of 8.5% or higher, including Georgia. The extension of benefits will cost $2.4 billion, and will be paid for with an extension of the federal unemployment tax (FUTA).
Contrary to the jubilant tidings on Wall Street, the recession is not over for unemployed and underemployed Americans.
Excerpt from Minyanville blog: I wouldn't underestimate how much fourth-quarter organic growth was represented in third-quarter GDP. Between Cash for Clunkers and the housing tax credit there was enormous demand pulled forward. At the same time an equal amount of effort has been taken by Washington to push into the future as much bad news as possible in the banking sector, through things like loan modifications.
Every earnings report you've read over the past three weeks represents the best 3.5% GDP can offer. Yet revenues consistently fell short of expectations. And, looking at September quarter-end loan delinquencies, there's been little to no improvement from the second quarter.
For what it’s worth, GDP is the past and unemployment is the future. And while all of Wall Street celebrated last quarter's GDP growth yesterday, everyone forgot the 500,000-plus new unemployed.
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