Economic Update:  Employment Update and Looking Ahead to 2010

01.08.2010

There is not much debate that the big story for 2009 was the employment situation.   Thus, we start the New Year with an update on the employment front, both local and national.    Positive signs continue to surface on the local employment situation, but the latest national jobs report suggest that the recovery will continue to be slow.  

Louisville Metro Employment

The November unemployment rate for Louisville Metro declined to 9.8% in November, down from an October rate of 10.4% (See Figure 1).   It now appears that the metro unemployment rate peaked back in June at 10.6%.    We will likely continue to see a gradual decline in the local unemployment rate throughout the year.  However, we will not return to rates of 6% that existed just a little more than a year ago.

Figure 1

While the unemployment rate was favorable for the latest metropolitan employment report, other labor force numbers pointed to a potentially positive trend as well.    Figure 2 shows the potential start of an increasing labor force, the number of employed and a continued decline in the number of unemployed.  Prior to November, we were seeing declines in the number of unemployed, but this was associated with a decline in the labor force and the number of employed.     This could have been interpreted as discouraged workers leaving the labor force.   Even though the number of unemployed was decreasing, we were not seeing the converse, a rise in the number of employed.

Figure 2

The November labor force numbers are only from one particular month, and it is too early to make any conclusions about a lasting trend.  However, we can only view these latest numbers as positive.    These numbers support our earlier call that the local unemployment rate peaked earlier this year, and year over year employment losses also hit a trough back in June.

Figure 3 shows year over year employment losses.   We continue to observe a deceleration in year over year losses.   We will continue to observe a deceleration through the year, but will not observe positive changes until late this year, or even into next year.

Figure 3

National Employment

You will hear many different spins on the employment report that came out this morning.    About the only word that comes to mind for me was dismal.   The consensus prior to the announcement was a flat change in monthly employment or even a small gain.   The report came out with a loss of 85,000 jobs for the month of December.   The unemployment rate did hold steady at 10%.

Source:  www.barrons.com

Going beyond the headline number, there were a few positives.  Temporary labor services and education and health care did observe increases in employment.   The increase in temporary labor services should be viewed as a favorable development.  Employers will call temporary labor back before making a long-term commitment.  So the increase in temporary labor services can be viewed as one of those signs of a recovery underway.

There were also more ominous signs in today’s report.  The unemployment rate that considers discouraged workers and those working part-time for economic reasons increased to 17.3%, from the previous month of 17.2%.   The mean duration of unemployment increased to 29.1 weeks, up from 28.6 weeks.      Additionally, in contrast to the metro employment situation, the national employment report showed declines in the labor force and the number of employed.   So nationally, we are seeing a greater discouraged worker effect, and this shows up in the alternative employment rate of 17.2%.

Concluding Thoughts

We will continue to observe stability in both the local and national labor market situation.  But as we have been suggesting for quite some time, it is going to be slow.  In fact, perhaps we might best describe this stability as “unstable stability.”   The nation will continue to undergo economic recovery, but due to changes that we’ve discussed many times in the One Weekly, this recovery will be one tough slog. 

Suggestions

If you have any suggestions on future columns or research about specific industries or other economic data, please send me an email at udufrene@ius.edu.

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This information is provided by

Uric Dufrene. 

Uric Dufrene, Ph.D. holds the Sanders Chair in Business in the School of Business at Indiana University Southeast.  He conducts research on local and regional economic trends, and teaches corporate finance at the undergraduate and graduate levels.   He previously served as dean of the School of Business.