December Jobs Report: Mr. Market shrugs it off, but it is much worse than the headline number indicates
So the government published the much-anticipated December jobs report this morning. 524,000 jobs were lost during the month of December...essentially in-line with the 525,000 that analysts were looking for. It's funny when a loss of half a million jobs is looked at as a good thing, but that's exactly how Mr. Market took this news. I guess that when the "whisper number" out there is for a loss of 700,000 to 800,000 jobs during the month, 500,000 isn't that bad. The Dow futures rose 75 to 80 points right after the report was released.
Unfortunately, the December report was much worse than the headline number indicates. First, there was a significant negative revision to the prior two month's numbers. November's job losses were revised up 51,000 to 584,000 and October's number was revised up 103,000 to 423,000. When one adds this additional 154,000 job cuts to the December number, were talking about a total of 678,000 jobs lost.
Even more troubling is the steep deline in the average hourly work week fell last month to 33.3. This is the lowest level ever recorded (the government began tracking this statistic in I believe 1964). The hours worked stat is a leading indicator for the jobs number. When combined with other evidence, such as the the latest extremely negative report by Challenger, Gray & Christmas - US 2008 planned layoffs most in 5 yrs -Challenger, this statistic leads one to believe that the January jobs number will be worse than the December number.
This is not entirely surprising. Many companies wanted to get their ducks in a row and cut costs before the end of the year. Hence the significant number of firings in Q4. Furthermore, many retailers were kept on life support during the holiday season by creditors to try to squeeze as much money as possible out of what was left out of them. These retailers will likely begin to file for bankruptcy in the near future and lay off additional workers. Similarly, not all of the plant shutdowns by automakers and suppliers have filtered into the numbers yet.
For the above reasons, I am hopeful that the worst of the layoffs that we will see will be restricted to the first half of 2009. If the jobs market stabilizes or at least the rate of job losses slows, even at a much higher level of unemployment say 8% or 9% or heaven forbid 10%, the market will begin to look past this traumatic period and towards the likely better economic environment in 2010.
The astronomical levels of unemployment that some alarmists are touting, like 30%, 50%, etc...simply are not possible (changing the definition of what the term "unemployment" actually means is along the way is a weak cop out). At that level, society would cease to function normally. Anyone who truly believes that we are headed for such a painful level of unemployment might as well grab their shovel and begin digging their bomb shelter in the backyard right now because there would not be mass chaos...not a healthy purging of the system.