Jobless claims numbers were just released, and it appears the worst-case-scenario projected by the Fed for 2009 was rose-colored optimism.
For the purposes of the TARP stress tests, the banks were told to assume a worst-case-scenario unemployment figure of 8.9% by year end 2009. The figures just released peg unemployment at 9.4% currently, and the year isn't even half over.
Worst-case-scenario projections for year-end 2010 were 10.3%. Anyone want to guess when we'll hit that number?
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Well, as we're in the most beautiful world of politics here, my bet is the time series will look like this:
2009-Q2: 9.4% 2009-Q3: 9.7% 2009-Q4: 10.0% 2010-Q1: 10.29% 2010-Q2: 10.29% 2010-Q3: 10.29% 2010-Q4: 10.30%
It's like the Chinese with their +8% GDP thing. They've always had exactly that per year for ages! Man can they plan well.
Even if companies completely stopped laying off people today, unemployment would still go up anyway.
Once the economy is perceived to be getting better, discouraged people get back into the job market thereby raising the unemployment rate (people who gave up on searching for a job are not included in the 9.4% unemployment rate).
I'll be the first to profess ignorance when it comes to unemployment benefits, but once someone's benefits are exhausted, they can't just reapply and start the process over again when the economy improves, right?
What I'm saying is, those people who are laying on the leg right now (for lack of a better term) waiting for the economy to improve to start their job search won't have an effect on future jobless claims.
Correct me if I'm wrong.
What your saying is correct, but the 9.4% unemployment rate measures the percentage of people looking for jobs that can't find one (based on a survey). If you include laid-off workers who have given up looking for new jobs or have settled for part-time work that rate would go up to 16.4% (an additional 7%).
What I am saying is if a portion of that additional 7% of people start looking for jobs again than the unemployment rate will increase even if companies stopped laying people off completely. And in theory the unemployment rate could reach 16.4% (maybe less if you exclude part-time employees) without laying off another employee.
Even in February most could see that there was a good chance we would hit and probably surpass 10% by year-end. I'm not sure how the worst financial crisis since the GD could have a worst case unemployment rate of 8.9%.
You guys need to take into consideration the fact that once the outlook for the economy becomes a little more positive, companies will begin hiring in order to try and gain an advantage over their competitiors. IE Walmart planning to hire 20,000 people by year end.
Employers cut a net 741,000 positions in January, 652,000 positions in March, 504,000 jobs in April, and 345,000 now in May.
Even if the economy turns around and all of a sudden companies will start hiring more than firing the unemployment rate will still go higher.
Lets say that in June the economy makes a miraculous turnaround and companies create a net 100,000 jobs. The unemployment rate will still go higher, because all of a sudden hundreds of thousands previously discouraged job-seekers will start looking for jobs again and will re-enter the ranks of officially unemployed (people who gave up looking for a job are not considered unemployed when calculating the unemployment rate).
That is why the unemployment rate has to go up no matter what happens.
"The number of persons working part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed in May at 9.1 million. The number of such workers has risen by 4.4 million during the recession. (See table A-5.)"
Thats from the report that was just filed by the BLS. I don't really disagree with you in that unemployment would still likely go up if companies completely stopped firing, I just think the amount you think it would go up is misleading. Most of that 16.4 percent you quoted comes from part time employees. If you were a part time employee, would you quit and join the ranks of the unemployed if the economy improves? No, you would actively look for a job while maintaining your current job. The number of people who have given up looking for a job and eventually will return to unemployment status is more likely a couple hundred thousand maximum - and they all would not return in the same month. Combine that with some companies deciding to hire, and it becomes a non-issue. I personally don't see unemployment going higher than 10.5-11 unless there is a major setback in upcoming earnings.
But if you continue reading on the BLS website it says (write below your quote):
"About 2.2 million persons (not seasonally adjusted) were marginally at- tached to the labor force in May, 794,000 more than a year earlier. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey."
2.2 million people is equivalent to 1.5% of the workforce and that is not a small number. So technically the unemployment rate should stand at 11% as of today, but it is 9.4% because of the way the government does the math.
Anyway the US lost 539,000 jobs (before revision) in April and the unemployment rate jumped from 8.4% to 8.9% or by 0.5%. In May the US lost only 345,000 jobs and the unemployment rate rose from 8.9% to 9.4% or by 0.5% as well.
Do you see the correlation, because I certainly don't. The fact is that a lot more people are entering the job market and that is what is responsible for at least 0.2% of the unemployment spike in May.
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