On October 2nd US September unemployment and nonfarm payrolls (nfp) will be released. The September unemployment report will be looked to for confirmation that the US recession is ending and the pace of job losses continues to slow.
August unemployment hit a 26 year high
The August US unemployment rate rose to a 26 year high at 9.7%. August nonfarm payrolls posted the smallest decline since August 2008 at -216k. There were downward revisions to the June and July nonfarm payrolls with 20k more jobs lost in June and 29k more lost in July than were previously reported. Since the start of the recession in December 2007 the US economy has lost 6.9 mln jobs. There are a total of 14.9 mln people unemployed. About 5 mln people have been unemployed for more than six months. 1.5 mln of the long-term unemployed will exhaust their unemployment insurance by the end of the year if Congress does not extend unemployment benefits. The teenage unemployment rate rose to 25% from 23.8% in August and the unemployment rate for men is 10.1% compared to women which is 7.6%.Five states have jobless rates above 12% (California, Nevada, Rhode Island, Michigan and Oregon).
Risk of a jobless recovery
The US is facing the risk of a jobless recovery as employers remain reluctant to hire new workers as productivity is rising and labor costs fall. US productivity rose by 6.6% in Q2 2009 and unit labor costs fell by 5.9%. The rise in productivity and decline in labor costs is a disincentive for employers to hire new workers as those employed become more efficient. The $787 bln US government stimulus plan helped to boost GDP but has had limited impact on jobs creation. Economic advisers to the White House had expected that improvement in GDP to translate to jobs creation but the historic relationship between GDP and jobs growth has yet to emerge. The Obama administration may be forced to consider additional measures to try to boost employment. Thursday the Obama administration announced $5 bln in research grants that the White House says will create thousands of new jobs.
ADP declines less than expected /jobless claims remain high
The ADP September employment report posted a smaller decline than expected with job losses reported at 254k. The market consensus for the ADP September employment report was for a decline of 200k. The September ADP report shows job losses at their lowest level since July of 2008 and that the pace of US job losses has slowed. The September unemployment rate is expected to confirm that the pace of US job losses continues to slow. September nonfarm payrolls are expected at -180k with the September unemployment rate rising to 9.8%. The ADP report suggests that that the September nfp decline with may be closer to -200k. Initial jobless claims for the week ending September 19th decreased by 20k to -530k. On Thursday initial jobless claims for the week ending 9/26 will be released expected at -535k. Jobless claims need to consistently drop below 400k to confirm that the US is creating enough jobs to match population growth. Thursday's jobless claims report will be looked to for further insight into how much the pace of US job losses have slowed. Jobless claims remain elevated. This suggests that the labor market remains weak with jobs hard to find. Elevated jobless claims is additional evidence that the US may face a jobless recovery. The Labor Department reported that the job opening rate fell to a record low in July with six unemployed people competing for each available job. Most analysts expect the unemployment rate to remain elevated well into 2010 and nfp is unlikely to turn positive before December. The trade will be looking at Friday's unemployment report for additional clues about the US labor market and the potential strength of the US recovery.
Figure 1 US non farm payrolls