Again, analysts talked about a turnaround because job losses were "just" 345,000. That's a higher number than any month in the 2001-02 recession, and larger than the month after 9/11. That's a green shoot? Yes, we'lll see the monthly unemployment numbers fall, but they're falling from historic highs. And, based on some research by the San Francisco Federal Reserve, it's likely that we'll see higher unemployment, and it will persist for a while longer.

Let me quote from and summarize some of the research. (It's not long, and worth reading.)

"Our analysis generally supports projections that labor market weakness will persist, but our findings offer a basis for even greater pessimism about the outlook for the labor market. Specifically, we suggest that the relatively low level of temporary layoffs and high level of involuntary part-time workers make a jobless recovery similar to the one experienced in 1992 a plausible scenario."

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Essentially, there are always workers moving into and out of employment. What they note is that the patterns seem to be changing. In the '70s and '80s, job losses were quick and deep, but the recovery was also quick. In the last 2 recessions, job recovery was noticeably slower, giving rise to the term "jobless recovery." It was the lack of hiring, and not firing, that was responsible for the slow employment recovery. I believe that before 1990 many of the job losses in recessions were from manufacturing. Businesses were quick to lay off and quick to rehire. We now have fewer manufacturing jobs, so the rehiring process has been much slower in recent recessions.

"The long and gradual return to pre-recession unemployment levels implied by the Blue Chip consensus forecast is consistent with a labor market recovery that is slightly weaker than that experienced in 1983 and slightly stronger than that experienced in 1992. However, should labor market conditions instead proceed along the path taken in the 1992 recovery, the unemployment rate could peak close to 11% in mid-2010 and remain above 9% through the end of 2011."

That's not in any Congressional budget forecast. Want to run an election campaign at 10% unemployment levels?

"... What does all this mean for the course of the labor market? We combine data on involuntary part-time workers with the standard unemployment rate to arrive at an alternative measure of labor underutilization. We plot this measure in Figure 3, which shows that the labor market has considerably more slack than the official unemployment rate indicates. The figure extends this labor underutilization measure using the Blue Chip consensus forecast for the unemployment rate as a benchmark and then adding a share of involuntary part-time workers based on the proportion of workers in that category to the unemployed during the current recession.

"This projection indicates that the level of labor market slack would be higher by the end of 2009 than experienced at any other time in the post-World War II period, implying a longer and slower recovery path for the unemployment rate. This suggests that, more than in previous recessions, when the economy rebounds, employers will tap into their existing workforces rather than hire new workers. This could substantially slow the recovery of the outflow rate and put upward pressure on future unemployment rates."

                        
Click to enlarge.

Was Income Really Up?

Now, let's turn our attention to today's headline. Income is surprisingly up. That has to be a green shoot, right? Well, not if you look at the underlying data.

Personal income from wages and salaries was down $12 billion in May. So how did income go up? A large increase in "government social benefits" and a decline in personal taxes accounted for the gain, and then some. The increase was the effect from the recent stimulus package, which is -- for now -- temporary, and not the result of a recovering economy. Hardly green shoots. It's just borrowed money from another (government) source. In principle, it's not much different from home-equity withdrawal, except that taxpayers are on the hook.