2009 Unemployment Duration in the United States by State

From the NY Times, unemployment duration in the United States by state. Still a very difficult climate for hiring in the United States.

Italy Facing Persistent Unemployment If Recovery

Bank of Italy governor Mario Draghi warned in a key speech Monday that unemployment in the country is likely to stay persistently high as economic recovery remains slow.

He said the financial crisis had weighed disproportionately on young people. Unemployment in Italy, for people between the ages of 20 and 34, reached an average of 13% in 2009, he said.

The national rate is 8.6% in March.

Starting-level salaries haven't changed much in 15 years, he added.

"A slow recovery increases the probability of persistent unemployment", Draghi said. "This condition, especially at the beginning of a professional career, tends to be associated with permanently lower salaries in the future".

Source: Dow Jones Newswire

Manufacturing Up, Jobs Continues To Be Down

Unfortunate as production in the US picks up, jobs continues to be a sore spot for the economy. The following chart via Clusterstock continues to point to questions that I've had for Manpower (MAN) which is heavy in the manufacturing sector.

Jobless Recovery in 2010 - MF Global

Recently MF Global released a research note concerning the top ten trends in 2010. One of the trends was the premise of a jobless recovery.

The following is the investor note from MF Global:

"2010 will be characterized by a jobless recovery. MFGR sees the unemployment rate peaking at 10.5% and closing the year between 9.5% and 10%. The unemployment rates in EM and ASEAN counties should fall more steadily while it will likely increase in Europe. MFGR is expecting the latter as many of the stimulus programs initiated by European government included programs directed solely at hiring or preventing layoffs.

Out of a survey of 10 Euro-Zone countries, 8 employed labour activation measures. Many of these programs are set to expire in the new year. As employers are facing a lack luster recovery, the likelihood of a robust expansion in the labour markets sans government incentives is minimal. Furthermore, employers will likely be forced to cut back on labour as its costs up to the point have been subsidized.

On the US front, the outlook for taxes is murky and the healthcare initiative which will likely force all employers to provide care or pay a penalty will discourage the expansion of the labour force. Though the Obama administration is extending the capital gains holiday for small businesses, employers need to feel confident that their profit margins will not erode in the future due to tax increases in order to genuinely contribute to job growth. Moreover, budget shortfalls at the state and local government level will cap government hiring.

Globally speaking, there has been a significant increase in structural employment that is now part of the new normal. The collapse of the financial markets has led to a permanent shrinkage of the financial industry and the impending regulation will make financial innovation, a factor that does lead to job growth, very difficult. The manufacturing industry faces the same problem. Globalization will lead to the removal of manufacturing jobs in advance economies and cause a shortage of skilled labour forcing many to look to build other skill sets."

Source: MF Global

Sluggish Recovery In The US Economy And Employment

So I've been looking at the government figures of their latest unemployment report from last week. The government figures beat consensus by a fairly large number.

130,000 jobs expected to be lost, while figures came in at 11,000 lost. While this was much better then expected figures were a bit inflated. As Rob Carnell from ING states the following:

In our view, the only potential fly in the ointment of this labour report is how believable it is. Payrolls has been making very, very slow progress in recent months, and such a dramatic turnaround will raise eyebrows, and may not be taken at face value by many. An improvement in the payrolls series always looked on the cards from last month. But most of the labour market data in the run up to this release had been consistent only with a very small step forward, so we may need to see this backed up again next month before concern about the labour market can really be filed away as ‘last year’s worries’.

We are also slightly curious about the apparent surge in government jobs, which on revision have risen by more than 50K in the last two months. When state and local finances are in such a deep mess, even the Obama fiscal package is unlikely to have generated this rapid turnaround in the public sector. More believably, goods producing, construction and manufacturing jobs all saw continued large falls.

So I would tend to continue to be cautious to a continued pick up. I don't believe that with higher taxes, increased regulations, and health reform in the United States pipeline that the government is going to have some epiphany to creating mass jobs.

Temporary employment firms ran up on these numbers however a closer look still states that most businesses are still relatively concerned with where this economy is headed, and have remained very non committal to hiring more workers. With wage growth that continues to be depressed, there is no sign that companies will hire a dramatic number of workers if they can wring out increased productivity from their current staff which has been under utilized, with full production at only 75-80% of their overall capacity.

Initial Claims Ending Week Oct 3 2009 US

Current the official unemployment rate in the US is 9.8%. Economist feel that it will take till 2013 to have our unemployment hit 5%.

""Never before has business shed so many workers so fast, so many people failed to find work who are looking for work, and so many dropped out of the labor force as in the current circumstance," said Allen Sinai at Decision Economics."

The Labor Department reported that initial claims fell 33,000 to 521,000 in the week ended Oct. 3.

However, the decrease in continuing claims likely reflects people exhausting their unemployment benefits after several months of looking for work. This does not reflect that jobs are abundant, nor does it mean that economic conditions have improved dramatically.

Fewer Layoffs Won't Mean More Jobs

"Companies, still wary of weak consumer demand, aren't doing much hiring. The trend could keep unemployment high for the next year.

Businesses will remain hesitant to hire as long as overall demand remains subdued, and that is almost certain to be the case in the coming year. Spending in the U.S. and elsewhere stabilized last quarter, but the lion's share of growth in the second half will come from companies replenishing their depleted inventories rather than from a resurgence in demand. Plus, businesses remain keen on cutting costs and keeping productivity high. Productivity, measured as output per hour worked, soared at a revised 6.6% annual rate last quarter, and another big gain is on tap for this quarter."

Source: Business Week

Add to this issue is the structural unemployment issue. There are those in the camp that say that temporary workers will be hired back first because companies may want to test out their demand thesis for additional workforce. The problem is that many positions will never return. These are those that are affected by structural unemployment.

Employers currently in the United States have a lot of leverage in terms of their workforce. Those are still hanging onto their jobs may get increased hours which is currently at 33.1 hours worked per work week. Say if an employer needs more production, they can invite their current work staff to bang out more nuts and bolts. Hence, this will in my opinion continue to be a weak environment for hiring.

Permanent Job Cuts

“No matter how you slice it or dice it, the U.S. economy remains fundamentally weak.”

That’s how David Rosenberg, formerly chief North American economist with Merrill Lynch, looks at today unemployment report in his daily newsletter, which he pens from his new perch at boutique investment firm Gluskin Sheff. Despite doses of government fiscal stimulus that are “dulling the pain” of contracting GDP, there is nothing the government can do about employment, writes Rosenberg, short of making firing illegal.

Sifting through the details of the Bureau of Labor’s report, details he calls “simply awful,” Rosenberg notes that 65% of companies are still cutting jobs, a “disturbing” stat, and manufacturing employment fell by 63,000 jobs in August, it’s lowest level since 1941 despite inventory replenishment that’s been widely reported.

Further, Rosenberg notes the shadow numbers, much of it buried in the “Household Survey.” The actual decline in employment was cushioned by more people working at home. Salaried workers, on the other hand, dropped 637,000, the largest decline since March. The household survey actually shows employment fell by 1 million, writes Rosenberg, if you dig into the details, “which is unprecedented,’ he notes.

Further, nine million people are now “working part-time because they have to, not want to,” adds Rosenberg. The adult male employment rate — males lost jobs at a faster rate than women in the August numbers — is already above 10% in the U.S.

Lastly, those looking for a job for more than six months without success are now a record one third of the total jobless, at 5 million, which Rosenberg argues portends a long-term trend in jobless — longer than the current downturn, in other words.

In conclusion, Rosenberg ends with some articles in The Wall Street Journal from August and September of 1930, after over a year of the Great Depression. The articles mentioned investors looking for places to put money to work in the stock market after a big 50% run-up.

“We only know now with perfect hindsight what these pundits did not know back then,” writes Rosenberg. “That there was another 80% of downside left in the bear market.”

Source: Gluskin Sheff

Less Optimistic Stance

National Small Business Association shows that its members are less optimistic as of July 7. Though the percentage of people expecting a recession in the next 12 months has decreased to 42 percent from 64 percent in December 2008, 51 foresee a flat economy and only 7 percent anticipate economic expansion.

Consumers also look for the job outlook to worsen , with 26.3 percent expecting fewer jobs in the months ahead

Source: forex

Prospects of a jobless recovery

From Kathleen Pender:

"The prospect of an economic recovery is growing stronger, but so are fears that unemployment could remain high for a prolonged period as it did during the previous two recessions.

If you are a U.S. manufacturer, you can't raise prices. The only way to increase profits is to cut costs," he says. One way to do that is to move production overseas.

Achuthan says that nonmanufacturing employment recovered quickly after the previous two recessions, but those gains were overwhelmed by job losses in manufacturing. "Ten years ago we had 18 million manufacturing jobs. Today we have 12 million.

What's different this time is that consumers, who are deeply in debt and have watched the value of their homes and investments plummet, might spend less than they normally would in a recovery, keeping a lid on job growth.

Another risk: Normally, when a recession includes a credit crisis, "the recovery is steep and drawn out," says Gary Schlossberg, a senior economist with Wells Capital Management. That suggests this recovery will be slow.

Economist Ed Yardeni expects "a very weak recovery in the labor market, even weaker than in the last recovery," he says.

Washington is throwing too many wrenches into the recovery mechanism. In the past it was simple: cut taxes and help the unemployed. We didn't use a recession to change all sorts of policies," such as health care, energy and union elections, he says. All this uncertainty could discourage hiring.

Yardeni also wonders "how we can have a sustainable recovery with the kind of deficits we are projecting. Normally deficits widen in recessions and narrow in recoveries. This time we are looking at structural deficits. That creates another layer of uncertainty."

Job market appears worse then first half of the year.

TrimTabs Investment Research, a research firm in Sausalito, Calif., takes a dimmer view on the upcoming U.S. jobs report, which is scheduled for Friday. Not only that, but TrimTabs says the job market was even worse than it appeared in the first half of the year.

TrimTabs says the U.S. economy probably lost 488,000 jobs in July. And it gets worse: based on unemployment insurance survey results, TrimTabs also expects the U.S. Bureau of Labor Statistics to revise its job loss estimates sharply higher for the first half of the year.

"While Wall Street is convinced the recession is over, the economy continues to shed jobs at an alarming rate," said Charles Biderman, CEO of TrimTabs.

TrimTabs says its "employment estimates are based on analysis of daily income tax deposits to the U.S. Treasury from all salaried U.S. employees."

Here's more from TrimTabs:

As job losses have continued at a rapid clip, declines in wages and salaries have accelerated. According to TrimTabs' tax data, wages and salaries fell 5.9% year-over-year in July, worse than the decline of 5.1% year-over-year in the second quarter.

"The personal income report the Bureau of Economic Analysis released Tuesday contained huge downward revisions to wage and salary growth," said Biderman. "Now that the BEA is using unemployment insurance reports from the first quarter to estimate current wage and salary growth, its data confirms what we have been reporting for months."

The BEA's estimates of wages and salary growth changed from year-over-year declines of 0.8% in April and 1.1% in May to year-over-year declines of 4.0% in April and 4.2% in May. Also, the BEA reported that wages and salaries dropped even more sharply in June, falling 4.7% year-over-year.

"Two months ago, we asked BEA economists how they reconciled the huge declines in real-time tax deposits with their report of a modest decline in wages and salaries," said Biderman. "They could not answer our question. We know now that by ignoring real-time data, the BEA was providing an inaccurate view of the economy's health."


This is going to be a very interesting report that is going to be coming out on Friday. I suspect that the green shoots that everyone feels is present will not materialize at least this quarter. Hence the weak ADP numbers reported this morning. Cisco Systems also reported that they laid off more then expected workers this past quarter. There is not enough demand to drive revenue for the private sector right now.

China's stimulus-fueled stock boom alarms Beijing

"But while investors expect the market -- up more than 80 percent this year -- to keep rising, Chinese leaders are alarmed. They worry that too much of the $1 trillion lending binge by state banks that paid for China's nascent revival was diverted into stocks and real estate, raising the danger of a boom and bust cycle and higher inflation less than two years after an earlier stock market bubble burst.

Beijing is trying to tighten credit controls without derailing the economic revival or causing a market crash -- a risky path at a time when Chinese leaders say a recovery is not firmly established.

"It's a very serious threat. The Chinese government is walking a tightrope," said Mark Williams, Asia economist for Capital Economics in London. "There is the question of what happens if they rein in lending, because there is really no strong evidence that private sector demand is picking up."

"Above 3,000 points, the benchmark index is just in the process of blowing a bigger and bigger bubble," said Wen Lijun, an analyst for Nanjing Securities. "It is just excessive liquidity and no other reason."

Source: AP

Standard and Poor's Overvalued

After a 40+% gain from the March lows on sub par volume, the S&P 500 seems overvalued relative to the current conditions in the economy. With companies beating on the EPS front due to cost cutting and reduction in head cut, revenue has been for the most part has not matched top end expectations. Hence, although the worst may have come and gone, we are still not out of the woods in terms of excess in the financial markets. With this added global stimulus program, we maybe in for another bubble to burst with the Chinese Shanghai markets up over 90%.

Clearly there is a lag from what actually happens with the economy and the stock market, however if we continue to buy at this point we may find ourselves paying over what the historical value is in the market.

Consumer sentiment drops in July

WASHINGTON (MarketWatch) -- U.S. consumer sentiment fell in July, according to a survey released Friday by the University of Michigan and Reuters, dragged down by a big drop in expectations about the economy.

Sentiment rose to a revised 66.0 from a reading of 64.6 in early July, but was down from the June reading of 70.8.

Economists surveyed by MarketWatch were expecting consumer sentiment to rise slightly to 65.5.

Analysts said the report highlights depressed levels of confidence as well as likely slow growth ahead.

"The July drop-back in confidence at still-depressed levels highlights the anemic pace of growth that appears likely as we enter the early quarters of the recovery," wrote Mike Englund of Action Economics in an email.

"While off the lows that were recorded when panic and paralysis were the order of the day, this measure of consumer sentiment nonetheless remains severely depressed," wrote Joshua Shapiro, chief U.S. economist of MFR, Inc., in an email.

Treasury prices remained lower Friday, pushing yields up, after the final reading of the index was released.

Both the current conditions and expectations readings fell in July, the survey found. Expectations plummeted to 63.2 from 69.2, while the current conditions number dropped to 70.5 from 73.2 in June.

The weaker expectations number is a sign of consumer worry about the economy, although it is up from 53.5 back in March.

Rebalancing global growth: A long way to go

"Governments can prop up economies temporarily, but rising budget deficits are not a route to sustainable growth. Eventually burgeoning debt will limit the room for fiscal manoeuvre, and politicians may balk at renewed stimulus long before then. Worries about the budget deficit are already weighing on political debate in WashingtonA solid global recovery demands healthy and balanced growth in private demand. Unfortunately, that still seems far off. "

And an interesting comment from "sebouh":

"Indeed a long way to go

This week the number of Americans filing for jobless benefits rose by 30,000 in the week ended July 18, the Labor Department reported Thursday. The total for the week was 554,000With nearly 15 million peolpe out of work, according the official figures, and 6.5 million jobs having been eliminated since the recession begain in December of 2007, this week's initial claims report spells increasing social misery for millions of workers.Wall Street, however, responded to the jobless claims report, along with better-then-expected corporate earnings and a slight increase in June existing home sales, by pushing Dow Jones Industrial Average up 188 points, ending the day above the 9000 mark for the first time since last November.The diverging fortunes of workers and corporate elite are the result of ruthless cost-cutting by big business, which is taking advantage of the recession to slash jobs and wages and drive up productivity worldwide. The banks and big corporations are being abetted by the policies of the Obama administration.In other words, this disperity does not lead to healthy recovery prospect and this further widens the risk for another round of economic contraction.

It is this increased expoitation of workers and the prospect of a permanent reduction in wages and benefits that Wall Street is celebrating. The implications for the working class are nothing short of catastrophic.Meanwhile the banks, which have benefited from hundreds of billions in bailout cash and trillions more in other subsidies, at taxpayer expense,are flaunting their good fortune by ramping up salaries and bonuses to levels high or higher than those prevailed before last year's crash.Moreover, according to Washington Post reported Thursday,"So far top six US banks have set aside 74 billion USD to pay their employees, up from 60 billion USD in the corresponding period last year." As the newspaper points out, this windfall will go disproportionately to top executives and traders, in the form of multi-million dollar compensation packages.

To conclude my statement, the world economy is showing some tentative signs of economic recovery due to massive government stimulus packages and bailouts in most developed nations. These government measures, however, will be "unsustainable" in the long run.In addition, the consumer demand will not come back as unemployment is continuously on the rise in most developed and developing countries."

Source: http://www.economist.com/opinion/displayStory.cfm?story_id=14085688&source=hptextfeature&mode=comment&intent=readBottom

No jobs, no growth

"It might take years for the labor market to fully recover as well: Most members of the Federal Open Market Committee said they expected it "to take five or six years" to bring the unemployment rate down to its long-run potential of around 5%.

Job losses have slowed, but they haven't stopped. The unemployment rate is expected to peak near 11%, according to Roubini. With a current jobless rate of 9.5%, there are now nearly six unemployed people for every job opening. For the first time since the Depression, most of those who are unemployed have lost their jobs permanently.

With so much competition for jobs, wages are dropping. The total wage bill for private industry has fallen at a nearly 5% annual rate over the past six months, the largest decline in the 50 years those data have been kept.

The only thing adding to income growth right now is government transfers, either from automatic stabilizers such as unemployment insurance or from the tax cuts in the stimulus package. Income from private sources declined in all 50 states during the first quarter.
The stimulus has now ramped up. While more money will be coming from Washington each month, the level won't increase. Economist Dean Baker of the Center for Economic and Policy Research figures we need $1 trillion in extra stimulus per year to drive the employment back to 5%, but we're getting only about a third of that.

The worst of the economic crisis is now behind us, but that doesn't mean the economy is all fixed."

Source: marketwatch.com

The Real Unemployment Rate Hits 68 Year High

"As bad as they are, these figures dramatically understate the true extent of unemployment. First, they exclude anyone without a job who is ready to work but has not actively looked for a job in the previous four weeks. The Bureau of Labor Statistics classifies such workers as “marginally attached to the labor force” so long as they have looked for work within the last year. Marginally attached workers include so-called discouraged workers who have given up looking for job-related reasons, plus others who have given up for reasons such as school and family responsibilities, ill health, or transportation problems.

Second, the official unemployment rate leaves out part-time workers looking for full-time work: part-time workers are “employed” even if they work as little as one hour a week. The vast majority of people working part time involuntarily have had their hours cut due to slack or unfavorable business conditions. The rest are working part time because they could only find part-time work."

Source: http://www.dollarsandsense.org/archives/2009/0709miller.html

Double Dip Recession?

“There is a real danger this is going to be a double dip and that after six months or so we’ll have some more bad news,” Feldstein, the former head of the National Bureau of Economic Research and Reagan administration adviser, said today in an interview on Bloomberg Television. “We could slide down again in the fourth quarter.”

"The economy could “flatten out” or “even be positive” in the third quarter, and then it’s likely to contract again in the last three months of the year as the effects of the federal stimulus program wear off and companies finish rebuilding inventories, he said.
“There isn’t going to be enough to sustain a really solid recovery,” he said, even though recent data has provided some “good news” on the economy."

Source: http://www.financialsense.com/Market/wrapup.htm

Seven Years of Subpar Growth

"The U.S. won’t see a return to “full” employment for another six years, helping to hold down inflation, according to former Federal Reserve Governor Laurence Meyer.

“I think there’s going to be a long legacy of the financial crisis and the deep recession,” Meyer said in an interview today on Bloomberg Radio.

The economy is “a very, very long way off” from its potential growth rate, Meyer said. While the expansion will probably be “modestly above trend next year” and “significantly above trend in 2011,” that won’t help restore the nation to a “normal” job-market, he said."

Source: http://globaleconomicanalysis.blogspot.com/2009/07/expect-seven-years-of-subpar-growth-and.html

Manpower Upgrade?

So the Standard and Poor's recently upgraded Manpower to a HOLD from SELL due to a change in how they value the company. Instead of using P/E as a way to value the company they are using P/S instead.

- Yes, Manpower generates massive revenue due to its scale in the global markets. However, quarter on quarter on yearly comps they are performing horribly. There have been small up ticks in employment. But nothing to say that we are out of the woods in terms of employment.

- Another thing to take note. There is not a lot of barrier to entree to recruiting. In each market there are competitive players that are via'ing for that commission fee. Some will under bid in order to win that contract. This causes mischief in this already low margin market.

- Sales from the prior quarter was down dramatically. Unless they continue to cut cost, and reduce overhead through reduced hours, continued cuts in admin, I foresee Manpower's numbers to be fairly muted in the markets that they continued to be weak in. Earnings will be announced on Thursday and I like many will look forward to this. Adecco has slashed a couple hundred from its payroll. I have not seen this from Manpower in a press release. It may want to do that to retain its very expensive valuation.