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Context of 'July 2, 2009: Economist: Negative Labor Market Will Continue to Weigh on Real Economy, Economic Recovery'

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The Bureau of Labor Statistics announces that it will no longer publish its monthly Mass Layoffs Statistics Report, which details factory closings around the country. The administration says the reports are too costly. Labor unions say the government is attempting to conceal negative economic news. [Savage, 2007, pp. 104]

Entity Tags: US Bureau of Labor Statistics, Bush administration (43)

Timeline Tags: Global Economic Crises

NYU Economics Professor Nouriel Roubini tells Bloomberg News that, following the $350 billion injection by the Bush Administration, President Barack Obama will have to use as much as $1 trillion of taxpayer funds to shore up capitalization of the banking sector. “The problems of Citi, Bank of America and others suggest the system is bankrupt,” Roubini said. “In Europe, it’s the same thing.” Roubini also predicts that oil prices will continue to trade between $30 to $40 a barrel all year. Regarding commodities, Roubini said, “I see commodities falling overall another 15-20%. This outlook for commodity prices is beneficial for oil importers, it’s going to imply that economic recovery might occur faster, but from the point of view of oil exporters, this will be very negative.” [Street Insider.com, 1/20/2009; Bloomberg, 1/20/2009]

Entity Tags: Barack Obama, Citibank, Nouriel Roubini, Bank of America

Timeline Tags: Global Economic Crises

According to a recent Manpower, Inc. survey, US employers’ plans to hire for the third quarter of 2009 are at a record low, and the jobless will have to wait many months more before finding a job. The agency reported that after they adjusted results for seasonal employment variations, its employment gauge for July through September 2009 was negative. In a statement released to media, Jonas Prising, president of Americas for Manpower, says employers are “treading slowly and watching with guarded optimism, hoping a few quarters of stability will be the precursor to recovery.” The report underlines economists’ predictions that unemployment will continue to climb even if layoffs subside. Recent Labor Department statistics reported a loss of 345,000 US jobs in May. Although less than the job losses recorded in the last eight months, the May 2009 jobless rate surged to its highest level in nearly 26 years. In a repeat of results from the two previous periods, 67 percent of employers anticipated zero change in third quarter 2009, Manpower says. Those who expected to boost their payrolls remained at 15 percent for a second time in a row, while those projecting additional job cuts fell to 13-14 percent. “While the numbers may not be as optimistic as we would like, it is positive to see no further deterioration,” says Jeffrey Joerres, Manpower’s chairman and chief executive officer. Six of 13 industries employers surveyed estimated better employment conditions than in the second quarter, with gains in leisure, hospitality, wholesale, and retail trades, while those in construction stated they would add staff for the first time in a year. The biggest hiring corrosion occurred in education, health services, and at government agencies. In three of four regions, the net employment gauge measured negative, and was zero in the Northeast. The measurement improved in the South, dropped in the West, and was little changed in the Northeast and Midwest. Net employment gauge figures are tallied by subtracting the percentage of employers that predict an employment decrease from those that foresee an increase. Manpower’s global outlook survey demonstrated that the net employment gauge for third quarter 2009 improved in 12 countries from the previous three months. Plans for hiring were strongest in India, Norway, and Poland. The Manpower Inc. survey is a quarterly measurement with a margin of error of plus or minus 0.49 percentage point in the US. The employment agency interviewed over 28,000 US employers for its national outlook and surveyed 70,000 companies for its third quarter global measurement. Manpower Inc. is billed as the largest temporary workers employment agency in the world. [Bloomberg, 6/9/2009]

Entity Tags: US Department of Labor, Jonas Prising, Jeffrey Joerres, Manpower Inc.

Timeline Tags: Global Economic Crises

On his website “Roubini Global Economics (RGE) Monitor,” New York University economics professor Nouriel Roubini interprets June’s unemployment report as a strong indication that any economic recovery indicators are “alleged green shoots” that are “mostly yellow weeds that may eventually turn into brown manure.” Known as “Dr. Doom” for his prescient 2006 speech to the International Monetary Fund warning fellow economists that the housing bubble would eventually lead to major global recession, Roubini analyzed June’s loss of 460,000 jobs as a strong indication that conditions in the labor market remain “extremely weak.” He also predicts that unemployment could reach 10 percent by the end of summer and that, by the end of 2009, the jobless rate “may well be at 10.5 if not 11 percent.” Roubini cites numerous reasons that an economic recovery, stumped by record high joblessness, is not likely to occur until unemployment falls below 8.5 percent in late 2013.
Roubini June 2009 Jobs Report Analysis -
bullet Details of the unemployment report are worse than reported since, not only are there presently large job losses, but firms are inducing workers to reduce their hours and their hourly wages. According to Roubini, when observing the effect of the labor market on labor income, include three important elements in the total value of labor income—jobs, hours, and average hourly wages. Roubini says all three elements are currently falling, making their effects on labor income much more significant than job losses alone.
bullet Job losses continue to exceed those in the last two recessions, and the unemployment rate has been rising steadily in the current cycle.
bullet Rising unemployment will raise default on consumer loans and further pressure bank balance sheets.
bullet Without home equity or easy credit, ongoing job losses and slower income growth will also keep up the pressure on consumer spending.
bullet Large unemployment, underutilization of labor, and sharp slowdown in wages will add to deflationary pressures in the coming quarters.
bullet Bank losses and tight lending are impacting households who already face wealth losses from housing and equity markets.
bullet Impact of financial sector problems on the real economy are intensifying job losses and leading to lower work hours and wage growth. This puts further pressure on consumer spending while raising mortgage, credit card, and other debt defaults (the unemployment rate is highly correlated with delinquencies on credit cards and auto loans), also putting additional pressure on financial and corporate sector balance sheets.
bullet US labor market aspects are worsening. Factor discouraged and partially-employed workers into jobless statistics, and the true and current unemployment rate is above 16 percent.
bullet Temporary jobs are falling sharply, also an indicator that labor market conditions are becoming worse.
bullet The average unemployment duration is at an all-time high, indicating that people are not only losing jobs, they’re finding it much more difficult to find new jobs.
bullet Based on the birth/death model, the Bureau of Labor Statistics (BLS) continues to add approximately 150,000 to 200,000 jobs, distorting downward the number of job losses. However, based on the initial claims for unemployment benefits, job losses are closer to 600,000 per month rather than officially reported figures such as the 467,000 in the June report.
bullet Should unemployment rates peak at or around 11 percent in 2010, expected bank loans and securities losses will be much higher than estimated in recent stress tests.
bullet While there was a retail sales boost and a boost in real consumer spending during January and February 2009, the numbers from April, May, and now June remain extremely weak in real terms.
bullet The significant increase in real personal income in April and May occurred only because of tax rebates and unemployment benefits.
bullet There was a sharp fall in real personal spending in April, with only a marginal increase in May, suggesting that, just as in 2008, most tax rebates were saved rather than spent. In 2008, people expected the tax rebate to stimulate consumption through September, yet the personal spending increase in April, May, and June 2008 fizzled out by July.
bullet Expect further significant reduction in consumer spending in the fall after the effects of the tax rebates fade since, according to Roubini, 2009 households are much more worried about jobs, income, credit cards, and mortgages than they are in personal consumption and spending. Roubini suggests that only approximately 20 cents on the dollar—rather than the 30 cents of 2008—is going to be spent in the fall of 2009.
bullet By the end of 2010 and in 2011, large budgets and their monetization will eventually increase expected inflation, leading to a further increase in 10-year treasuries, long-term government bond yields, and mortgage and private-market rates. Combined with higher oil prices partly driven to increase by the treasuries, bonds, mortgage, and private market wall of liquidity, as opposed to fundamentals alone, this “could produce a double whammy that could push the economy into a double-dip or W-shaped recession by late 2010 or 2011, so the outlook ahead for the US and global economy remains extremely weak.”
bullet The unemployment rate is already over 10 percent in approximately 13 states—and steadily rising. The ISM Employment Index for manufacturing and non-manufacturing has been contracting at a slower pace in recent months. Manpower Survey shows most employers plan to hold head count steady in the third quarter of 2009 relative to the second quarter of 2009. Online job vacancies fell in June, but have shown some improvement since March. JOLTS: The job openings level in April was at its lowest point since the series began in 2001. The hiring and job openings rates were unchanged and remained low (see June 9, 2009).
Nobel Laureate Agrees - Economist Paul Krugman, 2008 Nobel laureate, comments: “Workers at any one company can help save their jobs by accepting lower wages and helping make the company more competitive. But when employers across the economy cut wages at the same time, the result is higher unemployment and lower wages in the economy. This will keep pressure on paying off debt and on consumer spending and the real economy.” [RGE Monitor, 7/2/2009]

Entity Tags: US Department of Labor, Paul Krugman, Nouriel Roubini, International Monetary Fund, Bureau of Labor Statistics

Timeline Tags: Global Economic Crises

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