Saturday, 7 February 2009

January Jobs Disaster

The US economy shed -598,000 jobs in January according to a BLS report released on Friday. Also January is the month when the BLS does its annual revisions which covers the previous 5 years of data. The effect of the revisions showed that job losses in 2008 were -311k more than expected.

As you can see from the table above, it is important to pay attention to revisions. In the first half of 2008 I was forecasting 6 digit declines in employment, although it took until the middle of the year to see them. However after the revisions we can see that payroll was declining by more than -100k per month from February.

In the past 12 months since the recession began 3.6 million jobs have been lost in the US economy, half of that total happened in the last 3 months. The official unemployment rate jumped to 7.6% in January, the highest since May 1992.

As mentioned previously an alternative measure of unemployment is U-6 which takes into account all the people that want a job but gave up, all the people with part-time jobs that want a full-time job and all the people who dropped off the unemployment rolls because their unemployment benefits ran out you get an unemployment rate is of 13.9%.

At some point drops of half a million jobs will subside to smaller numbers but it is conceivable that we can get a few more months of such drops before things start to improve. With job losses expected to extend into 2010 the notion of the official unemployment rate breaking into double digits is becoming a larger possibility.