UNEMPLOYMENT

June 5 -- The May jobloss report came in much lower than expected at 345,000 with many expecting joblosses for May to hit 550,000. Moreover, March and April's jobloss reports were revised stating that 80,000 of those joblosses DIDNT occur - if my stating it that way makes sense. That's a good thing. Nonetheless, the unemployment rate increased MORE than expected from 8.9% to 9.4% (when 9.2% was expected). So what gives? Well, with the start of summer comes college students and others that are looking for some work and money, and they can't find jobs. So that means they are "unemployed" and contributing to the 9.4% number but they weren't "laid off" so they AREN'T included or contributing to the jobloss reports number of 345,000.

Also of note is that its estimated that the SHADOW UNEMPLOYMENT RATE is now at 16.9%. This number gets less press coverage but is a serious number because this includes people that have taken part time jobs or jobs below their means or ability just to get SOME cash to pay bills etc. So technically they aren't unemployed but by all means they sure aren't a sign of a stable and strong economy.

June 4 -- Weekly initial unemployment claims came in at 620,000, which was in line with and slightly below expectations of 623,000. The shortened holiday week may have influenced data. Regardless, the initial claims number continues to show that unemployment/firings may have PEAKED, which is a far cry though from saying that jobs are being CREATED. The markets appears to have stalled and are now expecting a plateau in unemployment claims. The next step? Seeing a more drastic decrease into the low 500,000s or some signs of actual job creation. Otherwise, the market may turn pessimistic. If there's one thing we know about optimism - its only as strong as yesterday's news.

June 3 -- Every month there is an unemployment report for the month before it. This report is often times on the first Friday or every month. The wednesday before THAT report, an ADP report will come out reporting the previous month's unemployment using different calculations (basically it just focuses on the private sector and DOESNT include government job creation or losses). The ADP report is a decent although sometimes quite inaccurate indicator as to what to expect Friday. This morning the ADP report showed 532,000 jobs being shed in the month of May. April reported a loss of -491,000 according to ADP (April's Friday morning government report was close to ADP showing a loss of 539,000). So what's this mean...Well, the consensus expectation for Friday's job loss report is 530,000 -- so if that's what's expected and it appears that might be quite accurate according to the ADP, then the markets should already have this priced in. The question will be any suprises to the upside or downside. The consensus RANGE is from -495,000 to -625,000. Going back into the -600,000 would certainly be a tough blow considering we all believe that jobless claims have started to plateau and even come down SLIGHTLY. Keep in mind -- the 2Q of a year is typically when the least job cuts occur. So, what MAY look like a stabilizing or improving trend may just be a seasonal lull before hiring accelerates again. Also consider though that at this point in the recession the government will begin ADDING jobs and creating jobs (like last month when it added tens of thousands of jobs for employees to do the 2010 census).

What may be MORE IMPORTANT in all of this is not just job losses (and tons of them) -- the plateau level is still the same or higher than the peak in previous recessions! - but rather that this ISN'T A "V" SHAPED RECOVERY. Companies AREN'T HIRING. So this unemployment is going to remain. And economies can't recover if people aren't making money. And people don't make money if they don't have jobs. So while companies are doing an excellent job of cutting costs currently - unfortunately, they aren't growing and creating jobs. Not their fault though really.


May 29 -- A point to keep note of, its possible that unemployment numbers (even as high as they are) are actually lower than the reality! Consider that 6.7 million people are working fewer than 35 hours a week in April because of employers that didn't want to lay people off but had to find a way to reduce costs...the solution = paycuts and/or less hours worked. This means that people aren't unemployed, but they're certainly NOT employed and financial sound as they were a year ago. The 6.7 million number is double the number of people working less than 35 hrs a week for April 2008. Moreover, it's reported that 16% of large companies have cut pay for employees and 20% have cut employee hours. Knowing that the economy is stabilizing and that actual GROWTH is far from nearby and that the consumer has been depended upon to support the economy and GDP growth for years, this only underscores in very bold print the nature of slow growth to be expected through 2010 at least. And with slow growth means slow employement and slow job creation. Its a cycle that may lead to stagnancy for a number of years. The question is - has the stock market already priced this in? does it truly believe this? or are the bulls honestly expecting GDP growth of 3% next year?

May 28 -- Jobless claims came in below expectations at 623,000. Expectations were for 635,000. However, the 623,000 number DOESNT reflect auto sector firings. Apparently no state cited the existence of any auto sector filings for the past week. The GM/Chrysler unemployment impact is inevitable. Moreover, the continuing claims number continues to rise, meaning that the unemployed are goign without jobs longer and continuing to drain economic recovery.


May 21 -- Economists expected initial jobless claims to come in anywhere between 620,000 to 675,000, and the actual consensus expectation was at 630,000. ACTUAL initial jobless claims came in at a more than expected (although not exactly crazily low) 637,000. Pretty much a break-even, showing that jobless claims and unemployment are continuing to rise at an alarming rate even if flattening out somewhat. What is MORE TROUBLESOME is that the "continuing jobless claims" number continues to rise - meaning that not only are people filing initial unemployment claims with their states but that they're having to continue to rely on those unemployment benefits for a long time - as opposed to finding a job and not filing "continuing jobless claims." The "continuing claims" number has continued to steadily increase and increased by 75,000 this week to a total of 6.7 million Americans filing continuing jobless claims each week. The report didn't really break the bank either way in terms of immediate stock market reaction.

May 14 -- And boom goes the dynamite. Well not entirely, but kind of. After a few jobless and unemployment reports that showed that the worst is behind us and that unemployment/jobless claims (while still very bad) may be LESS bad, the number of initial jobless claims reported for the past week jumped back up to 637,000. This exceeded the consensus of 609,000 and the entire consensus range expected by economists anywhere between 590,000 to 625,000. More fuel to sell and go lower in the Dow? More reality to a situation that was seen as too rosy?

Keep in mind that unemployment can be a catalyst to drive banks into worse and worse financial realities. Bank stress tests has an assumption that the "worse case scenario" would involve a 10.3% unemployment rate by the end of 2010. We're already practically at 9% unemployment less than half-way through 2009. As unemployment worsens and people can't pay their bills, those defaults and bank losses increase and it becomes apparent that banks need even MORE capital. Half of the recent rally was based on the assumption that we now know exactly what capital banks need to survive in a "worst case scenario." Well, what if the assumptions for the "worst case scenario" weren't really bad enough?


May 4 -- For a number of sessions now stocks have started to sell into rallies. Think about it, a month ago, stocks were rallying on "less than bad" news. Now they're having trouble rallying on "good" news, such as the April unemployment number of 539,000 which dramatically beat out the concensus of 610,000. Granted, a large chunk of unemployment in April was offset by government hiring short-term employees to conduct the 2010 census, but still.