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The Dismal State of Unemployment


Job losses about to go from bad to worse.


I've been following a number of unemployment charts showing just how bad the current recession is. Click on any chart to see a sharper image.

Job-Loss Recovery

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The last 3 recessions are unlike the 8 preceding ones. For numerous reasons described below, we're heading for another job-loss recovery.

Job-Loss Recovery Detail

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If the pattern holds, unemployment will rise until 2011 or beyond. Moreover, take a look at the first chart again. Odds of a double-dip recession similar to 1980-1982 are high after whatever inventory-rebuilding and bottom-fishing in housing ends.

Consumer Confidence About Jobs

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Contrary Investor writes:

"The jobs hard to get response is pushing up against 30 year highs seen in the last few months. Likewise the jobs easy to get component of the survey has hit a new low for the current cycle. We'll just have to see how hard the folks at the Bureau of Labor stats can goose the headline payroll numbers for July with further Birth/Death model estimates. We'll be surprised at nothing. But consumers are telling us labor market conditions have worsened, despite the government numbers. And without question this has driven their consumption behavior. "

Decade For Lost Jobs

Please consider the following chart from A Lost Decade for Jobs by Michael Mandel of BusinessWeek.

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Record Number See Benefits End

The following chart is courtesy of David Rosenberg.

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Take a good look at that chart. It's 50,000 now. The expectation is 500,000 by September and 1.5 million by the end of the year. What are the odds Obama creates 1.5 million jobs by the end of the year? Can he really create any? For how long?

While on the subject of claims, please consider the following 4 charts courtesy of Chris Puplava at Financial Sense. I asked him to chart data from Moody's.

Continuing Claims Since 2000

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Continuing Claims Since 1970

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Continuing Claims as % of Population Since 2000

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Continuing Claims as % of Population Since 1980

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Chris notes: "The EUC and the extended benefits come out with a lag as Moody's had data for them only up to July 11 while the continuing claims data is up to July 18. The charts above are through July 11."

I commented on the above series of charts in Weekly Unemployment Claims Portend Disaster.

Here's a snip.

Unparalleled Continuing Claims

On a percentage-of-population basis, this recession is unparalleled.

Making matters worse, the US consumer was nowhere near as leveraged to real estate in 1980 or 1982 as now. Also note that boomers are heading into retirement now, undercapitalized and looking for jobs, in effect, competing against their kids and grandkids for jobs.

Look at the average age of baggers in grocery stores or greeters at Wal-Mart (WMT). These people aren't working because they want to; they're working because they have to. Demand for jobs is at an all-time high while the number of available jobs and the pay scales of those jobs have both collapsed. The employment situation isn't only an unmitigated disaster, things are about to get worse with pending state cutbacks.

Because of expiring claims, continuing-claims data will soon start looking better. The reality however, is that things will get worse for another year as unemployment soars into double digits. My forecast in January was 10.8% in 2010 while the Fed's was 8.5%. I see no reason to change mine, but the Fed upped theirs.

The implications for housing, and especially commercial real estate, are ominous

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