Employment situation: 9.7% unemployment, 20,000 jobs lost
Those are the numbers. But this month’s unemployment rate and the non-farm payrolls number are less important this go round. The devil is in the details here because we have some major benchmark revisions and that means changes to historical data. Bloomberg has a report out which says the government’s own statisticians have anticipated a net downward revision of 824,000 jobs due to the failings of the infamous birth-death model (see story here). I have yet to parse this data, but will do so shortly. I can say that 11 of 12 months in 2009 had negative jobs revisions. November was the only positive revision. On the surface, it sounds like more people are still dropping out of the labor pool.
That said, here are a few factoids about previous recessions.
- In the last recession, the absolute number of unemployed persons as measured by the household survey didn’t top until April 2002, 5 months after the statistical recession was said to have ended.
- In the early 1990s, the number of unemployed topped out in June 1992, 15 months after the statistical recession ended.
*Note: both of these are seasonally-adjusted numbers.
The takeaway is that employment continued to rise in both cases without an economic relapse. Stimulus, automatic stabilizers, low interest rates and the inventory cycle served to cushion the downturn and keep us from double-dipping. This is why I have said repeatedly that your base case scenario has to start with a multi-year recovery. Any divergence from that can only be explained by factors specific to this downturn. The factors I point to include large numbers of mortgage defaults, a withdrawal of monetary and fiscal stimulus, and state government retrenchment.
But, let’s not forget my Employment Rate Illusion hypothesis where the higher the unemployment rate, the bigger an impact it can potentially have on the psychology of consumers. In 1992 or 2002, consumers didn’t face almost double digit unemployment rates. But, apparently, the rate is now coming down in 2010.