Negative News in Unemployment - where does Clark and Floyd Counties stand?  Plus positive news for manufacturing

07.10.2009

The economic news for last week was mixed, but on balance, I would place in the more negative category.

The Louisville unemployment rate for May increased to 10.2%, and the nation’s June unemployment rate increased to 9.5%.   The Louisville region saw May employment losses accelerate from the previous month, and the percentage year over year job loss now exceeds 4%, the highest since 1990.     Almost 85% of the year over year job losses occurred in four key sectors:  mining and construction, manufacturing, transportation and utilities, and leisure and hospitality.    The region had already experienced losses in construction, manufacturing, and transportation.   But the big news here is on the leisure and hospitality front.   Losses in this sector are beginning to feel the effects of a retrenching consumer, and shifting consumer trends that include higher savings and less discretionary spending.   Challenges in the leisure and hospitality sector will place greater strains on the commercial real estate market.

Nationally, employment losses for June increased to 467,000, much higher than the consensus estimate.   The 467,000 decline in employment losses also reverses the 4-month trend of shrinking month to month job losses.   The positive news associated with last month’s revised decline of 322,000 was erased with this negative national report.

Last week, new claims for unemployment did fall by 16,000.    For the most part, the trend for new claims has been trending downward.   See the 4-week moving average below.  As mentioned previously in this column, the unemployed continue to face significant challenges in finding work.   Until we see a change in the length of unemployment, we will obviously continue to see elevated rates of unemployment.    The combination of elevated rates of unemployment and shifting consumer trends will certainly slow any recovery.   We will be in for a very wide U shape recovery.

There was some good news last week for manufacturing.   The monthly Institute of Supply Management (ISM) Manufacturing Index continued to trend upward.  The index rose above 44.8, continuing the 6 consecutive monthly increases.    Any number below 50 signals contraction in manufacturing.    Historically however, any number above 43 represents growth in the overall economy.   So this is further evidence that the economy may have reached a trough in the business cycle, or certainly about to enter one.  Last week’s national employment report also indicated that the pace of manufacturing job losses declined.   Given that the inventory to sales ratio continues to decline, we should begin to see an increase in production.   This was also reflected in the ISM component for production which was above 50, thus signaling an increase in production nationally. 

Locally, Floyd and Clark unemployment rates have been lower than national, state, and metropolitan averages.  During the month of May, Floyd and Clark rates were 8.5% and 8.7% respectively.   The latest data on non-farm payrolls at the county level also showed that percentage job losses for Floyd and Clark were smaller than Louisville metro and the nation.

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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.