Economic Update:  Big Surprise This Morning in National Jobs Report

12.04.2009

The monthly Metropolitan Employment report was released this week by the Bureau of Labor Statistics.  The report indicated that the unemployment rate for Louisville Metro increased from 10.1% to 10.3% for the month of October.  Figure 1 shows the significant spike in the unemployment rate that occurred late 2008 and early 2009.   Since then, we’ve seen up and down variations around the 10% level.   We’ll likely see this trend continue for a while, and gradually see the rate come down and hover around the 8% level.   Notice the unemployment line looks like an inverted U.   Basically, we are now experiencing the bottom of a U in the U shape recovery that is underway.

Figure 2 shows the level of total non-farm payroll jobs from the start of the recession to the latest month.    While the recovery of jobs will be slow, we are seeing an improvement in the loss of non-farm payroll jobs.  Year on year losses have been decelerating, and the latest report indicated an increase from the previous month.

Figure 3 shows the monthly year on year change for key sectors.   Across the board, most sectors are showing improvement from earlier in the year.  Manufacturing is perhaps showing the largest improvement as job losses have decelerated significantly from earlier in the year.  As we suggested in this column sometime ago, we were expecting a recovery in manufacturing primarily due to inventory restocking.    Moving beyond the inventory re-stocking phase, the consumer will have to drive demand in order to see a sustained recovery.  Due to the expected softness in the consumer however, exports will be crucial for domestic manufacturers.

Outside of leisure and hospitality, the sectors experiencing the smallest improvement are tied to the spending habits of the consumer.   Retail trade and transportation and utilities have seen only minor changes in any improvement in losses.    The BLS does not report transportation separate from utilities, but it is a good hunch that most of these losses are primarily in transportation.   

Health care and education services continue to be positive, and government sector employment showed further increases.  We continue to see softness in professional and business services, and information is observing minor changes.   The professional and business services should begin to show some improvement.

National Jobs Report

There was a big surprise in the national jobs report this morning.  The BLS reported that only 11,000 jobs were lost last month.   This is in significant contrast to the 130,000 decline that most economists had expected.   The nation’s unemployment rate dropped to 10%.

If we see gains next month, you can just about take any recent economic forecast and throw it out the window, including the one of this writer!

National Claims for Unemployment

The weekly report for new unemployment claims indicated that new claims fell under 500,000.   This is another significant development.  If new claims remain under 500,000 and show continued declines, we will begin to see declines in the national unemployment rate.

ISM Non-manufacturing Index

The service economy is a significant chunk of the overall US economy.   In addition to releasing a monthly manufacturing index, the Institute of Supply Management releases an index tied to the service economy.   The report released this week showed the index falling under 50.  Any number less than 50 shows contraction and any number exceeding 50 shows expansion.    Softness of the consumer was mentioned as one of the reasons for the decline.

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.