24/7 Wall St.

We keep trying to look for good news on the jobs front.  Unfortunately, there is almost none to be found.  The Conference Board Employment Trends Index was released today and the report shows that the index declined further in November.  This is not meant just as a backward reporting number like most index reports.  It is supposed to be used as a predictive tool.  As you will see, the implications are for another 1.1 million jobs to be lost and there is no formal cut-off indicated.

The index fell to 102.9, a drop of 1.6% from the October revisedfigure of 104.5 and down more than 13% from a year ago.  The reportnotes that the U.S. economy lost 1.9 million jobs, but moreimportantly the data suggests that job losses could pass 3 million jobsby mid-2009.  And to add insult to injury, the report also notes that"the continued deterioration in the labor market will exert significantdownward pressure on wages."

Bad news on the jobs front is now the norm.  This marks a 16 month-longdecline in the Employment Trends Index.  It is also seen in all eightof its components.

An area we have been paying particular attention to ourselves inanalyzing and forecasting is the declines we have been seeing intemporary jobs and the decline in  part-time jobs. For 24/7 Wall St., this is particularly troubling at this time ofyear.  Retail jobs contracted and the decline in temporaryhires and part-time hires is something which we feel is going to createa ghastly jobs report for January and February.  After all of theholiday returns come about, we will not be shocked if you literally seeabout one in five retail jobs get cut with the caveat of "We’d likesome of you to come back in the mid-summer for the "Back to School"sales or in late-February for our inventory blowout sales."

Again, it is becoming excessively difficult to find good news on thejobs front.  But there is one bit of Panglossian data here.  One issuewe have commented on is to watch out for a "decline in the rate ofchange."  The Conference Board is noting a 3 million figure, whichmeans that the expected gain is for another 1.1 million on top of the1.9 million so far.  No, that isn’t good on the surface.  But over thelast 3-month period we have seen 1.2 million the entire 1.9 millionjobs lost this whole year. 

December’s report may not look as bad as November’s, but the job lossesfor January and February have a shot at looking atrocious.  If thatholds true, then the interpolated additional 1.1 million jobs lost overthe coming six months would at least in theory be front-end loaded.That means that in another 60 to 90 days  the worst part of thedata on the jobs front may be behind.

But this data would also put unemployment well under the 8% hurdle, andmany are now calling for unemployment to surpass 8%.  We originallythought that 7.0% to 7.5% range was a likely figure.  But we have nownoted over the last couple of months that the most recent data is nowsuggesting a forward unemployment rate north of 8%.

If we keep seeing hires in government and health care that at leastmight get mitigated a bit.  The problem is that neither of those add tothe real private sector of implied GDP.

Jon C. Ogg
December 8, 2008