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Job’s Report Comes in Below Expectations, Unemployment to 26 Year High

October 2nd, 2009 Michael McDonough

In September non-farm payrolls declined 263k, versus a consensus forecast of -175k, and a revised decline in August of -201K.  Payrolls have now declined for 21 consecutive months.  Over the last 21 months 7.2mn people have lost their jobs.  September’s unemployment rate rose to 9.8% from 9.7%, this was inline with expectations, but the highest level since June 1983.  This data continues to indicate that there will be no quick fix for the labor market, and that consumers will continue to face significant challenges.  Most forward looking indicators toward employment, especially initial jobless claims, are still indicating further deterioration to the nation’s employment situation, despite second derivative improvements. Job losses will remain a reality into 2010, and in all likelihood the unemployment rate will top 10% before leveling off.  It is important to note that employment does tend to lag economic recoveries, however, it will be hard for any recovery to gain traction with an increasing number of consumers out of work and without and/or unwilling to use credit.

Looking behind the headline, a decline in the average work week and hours work will likely lead to stagnant performance for September’s income.  A worsening employment situation will assuredly keep the FOMC’s punch bowl in place while other parts of the economy show modest gains.

Private Sector -198,000
o Natural Resources & Mining -1,000
o Construction -64,000
o Manufacturing -51,000
–Durable goods -43,000
–Non-durable goods -8,000
o Services -147,000
–Wholesale Trade -4,900
–Retail Trade -38,500
–Transportation & Warehousing -15,400
–Utilities -700
–Information & Media 0
–Financial Svcs & Real Estate -10,000
–Professional & Business Svcs -8,000
–Education -16,900
–Health Svcs 20,500
–Leisure -9,000
Government -53,000
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