by Calculated Risk on 1/07/2011 10:01:00 AM

Here are a few more graphs based on the employment report ...

Percent Job Losses During Recessions

Click on graph for larger image.

This graph shows the job losses from the start of the employment recession, in percentage terms - this time from the start of the recession.

In the previous post, the graph showed the job losses aligned at the bottom.

The dotted line shows payroll employment excluding temporary Census workers.

This is by far the worst post WWII employment recession.

Part Time for Economic Reasons

From the BLS report:

The number of persons employed part time for economic reasons (some-times referred to as involuntary part-time workers) was essentially unchanged in December at 8.9 million. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

The number of workers only able to find part time jobs (or have had their hours cut for economic reasons) declined slightly to 8.931 million in December. This has been around 9 million since early 2009 - a very high level.

These workers are included in the alternate measure of labor underutilization (U-6) that declined to 16.7% in December. Still very grim.

Unemployed over 26 Weeks

This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 6.441 million workers who have been unemployed for more than 26 weeks and still want a job. This was up from 6.328 million in November. It appeared the number of long term unemployed had peaked, however the increases over the last three months are very concerning.

Summary

This was a mixed report.

The best news was the decline in the unemployment rate to 9.4% from 9.8% in November. However this was partially because the participation rate declined to 64.3% - a new cycle low, and the lowest level since the early '80s. Note: This is the percentage of the working age population in the labor force (here is the graph in the galleries of the participation rate).

The 103,000 payroll jobs added was below expectations of 140,000 jobs, however payroll for October payroll was revised up 38,000 and November was revised up 70,000 32,000 for a total of 70,000 (ht Mish).

The increase in the long term unemployed, and the high level of part time workers for economic reasons are ongoing concerns. The average workweek was steady at 34.3 hours, and average hourly earnings ticked up 3 cents.

• Earlier Employment post: December Employment Report: 104,000 Jobs, 9.4% Unemployment Rate

by Calculated Risk on 1/07/2011 08:30:00 AM

From the BLS:

The unemployment rate fell by 0.4 percentage point to 9.4 percent in
December, and nonfarm payroll employment increased by 103,000, the U.S. Bureau of Labor Statistics reported today.

Payroll for October payroll was revised up 38,000, and November was revised up 32,000 (total of 70,000). (edit)

The following graph shows the employment population ratio, the participation rate, and the unemployment rate.

Click on graph for larger image.

The unemployment rate decreased to 9.4% (red line).

The Labor Force Participation Rate declined to 64.3% in December (blue line). This is the lowest level since the early '80s. (This is the percentage of the working age population in the labor force. The participation rate is well below the 66% to 67% rate that was normal over the last 20 years.)

The Employment-Population ratio increased to 58.3% in December (black line).

The second graph shows the job losses from the start of the employment recession, in percentage terms aligned at maximum job losses. The dotted line is ex-Census hiring.

For the current employment recession, employment peaked in December 2007, and this recession is by far the worst recession since WWII in percentage terms, and 2nd worst in terms of the unemployment rate (only the early '80s recession with a peak of 10.8 percent was worse).

This was slightly below expectations, although the upward revision to October and November were signficant. I'll have much more soon ...

by Calculated Risk on 1/06/2011 10:57:00 PM

From Alejandro Lazo at the LA Times: Housing bust creates new kind of declining city

"Some neighborhoods are going to suffer tremendously or are never going to come back or come back very, very slowly," said James R. Follain, senior fellow at the Rockefeller Institute of Government ...

Potential candidates for long-term decline named by the study are the areas hit hardest by the drop in home prices in recent years. They include several inland California metropolitan areas that grew rapidly during the boom, including Stockton, Modesto, Fresno, Riverside and San Bernardino. Las Vegas and Miami also made the list.

A traditional city in decline is one that has suffered a sustained population drop, leaving behind empty houses, apartment buildings, offices and storefronts. Cleveland and Detroit, for instance, suffered from the erosion of manufacturing and the loss of residents, who left in search of jobs.

Instead of eroding a particular industry, however, the housing bust left a glut of homes because of overbuilding and the foreclosure crisis. Follain argues that the future of these cities is threatened in similar ways to that of Rust Belt cities.

Here is the report: A Study of Real Estate Markets in Declining Cities

There is a "particular industry" gone in these new declining cities - construction!

Earlier: Employment Report Preview

by Calculated Risk on 1/06/2011 07:29:00 PM

From National Federation of Independent Business (NFIB): Small Business Hiring Stagnant in December; Likely to Improve in 2011

“Reports of net job creation continued to oscillate around the “0” line in December. Asked about changes in total employment over the last three months, 13 percent of owners reported increasing employment at their firms by an average of 3.5 workers while 14 percent reported (down two points from November) reducing total employment an average of 2.9 workers per firm. Clearly, December showed no surge in small business hiring. ... Still, the percentage of owners reporting higher employment levels is the second highest reading since December 2007...

“The good news is that the two job creation indicators, job openings and job creation plans, both reached new recovery highs. The percent of owners reporting hard to fill job openings rose four points to 13 percent, the best reading in 24 months. Plans to create jobs gained two points, rising to a net 6 percent of all owners, the best reading in 27 months. These indicators point to a pickup in job creation activity for the first quarter of 2011. However, the small business sector continues to underperform on job creation in this recovery compared to other recovery periods.”

NFIB will release their December Small Business Optimism survey on Tuesday.

Note: Small businesses have a larger percentage of real estate and retail related companies than the overall economy, so it is no surprise that hiring has lagged.

by Calculated Risk on 1/06/2011 04:33:00 PM

The BLS will release the December Employment Report at 8:30 AM tomorrow. The consensus is for an increase of 140,000 payroll jobs in December, and for the unemployment rate to decline to 9.7% (from 9.8% in November).

Gregg Robb at MarketWatch reports there have been some upward revisions: Optimism over government’s job report grows

Economists polled by MarketWatch are now expecting 175,000 nonfarm jobs created in December, up from 143,000 just a few days ago.

The unemployment rate is expected to remain steady at 9.8%.

Click on graph for larger image in graph gallery.

This graph shows the net payroll jobs per month (excluding temporary Census jobs) since the beginning of the recession. The estimate for December is in blue.

Last month the BLS reported a disappointing 39,000 jobs added in November. That was significantly below expectations of 145,000 jobs.

However - as always - we should be careful not to read too much into any one month of data. A good example was in 1997. The economy added 280,000 jobs per month on average, but in August 1997 the BLS reported a decline of 18,000 jobs! Was the employment boom over? Nope. The following month the BLS reported a gain of 508,000 jobs.

And that also suggests the possibility of some bounce back from November (or an upward revision to the November payroll numbers).

Here is a look at a few of the recent employment related reports:

• ADP reported Private Employment increased by 297,000 in December, the largest gain ever for the ADP series (started in 2001). This was well above expectations of 100,000 private sector jobs - and there is widespread skepticism that the economy actually added anywhere near that number of jobs. Andrew Tilton at Goldman Sachs noted yesterday:

[W]e view the dramatic improvement shown in the ADP report with skepticism ... while we do expect a meaningful pickup in employment growth in 2011, we have not changed our forecast of a 100,000 increase in nonfarm payrolls in December.

• Weekly initial unemployment claims were down significantly over the last couple of months.

The average over the last 5 weeks was 413,000 initial claims per week.

This was down sharply from the October the average of 456,000, and the November average of 431,000.

• However the ISM indexes showed slower employment growth.

The ISM manufacturing manufacturing Employment Index registered 55.7 percent in December, 1.8 percentage points lower than the 57.5 percent reported in November. The ISM Non-manufacturing employment index showed slower expansion in December at 50.5%, down from 52.7% in November.

• The Job Openings and Labor Turnover Survey has been showing an increase in job openings.

This data is only through October.

The yellow line (job openings) has been increasing steadily since early last year.

Overall I think the labor market is improving. Anything less than the addition of 100,000 nonfarm payroll jobs would be disappointing, and there appears to be the potential for an upside surprise. However I expect little change in the unemployment rate.

by Calculated Risk on 1/06/2011 02:03:00 PM

From the WSJ: EU Proposes Plan for Bank Failure

The EU executive arm, the European Commission, Thursday released a hefty 100-plus page consultation paper open to public comments until March 3, which aims to abolish the excuse that a bank is too big to fail. It asks whether bank bond holders should share in paying for future bailouts ...

[A] diplomat added: "The overriding objective is to make sure creditors bear the appropriate share of losses of a failing bank and these aren't immediately passed along to taxpayers."

Here is a look at European bond spreads from the Atlanta Fed weekly Financial Highlights released today (graph as of Jan 4th):

Click on graph for larger image in new window.

From the Atlanta Fed:

Greek, Irish, and Portuguese bond spreads (over German bonds) continue to be elevated, rising since the December FOMC meeting.

Since the December FOMC meeting, the 10-year Greek-to-German bond spread has widend by 105 basis points (bps) (from 8.85% to 9.90%) through January 4.

Similarly with other European peripherals’ spreads, Portugal’s is 38 bps higher, and Ireland’s spread is 88 bps higher.

Note: the Atlanta Fed has added Belgium.

The bond yields have increased today. The Portugal 10 year is at 6.96%, the Ireland 10-year bond yield is over 9%, and the Greece 10-year bond yield is at a record 12.64%.

Clearly investors are pricing in a haircut.