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December Jobs Report: Mr. Market shrugs it off, but it is much worse than the headline number indicates

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January 09, 2009 – Comments (2)

 

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.

Deej

2 Comments – Post Your Own

#1) On January 09, 2009 at 9:40 AM, JGus (28.98) wrote:

Agreed...This was my comment to EPS Momentums rather upbeat analysis of the jobs report:

"If economists predicted the total and complete meltdown of our system and it came to pass, would that be a reason for the markets to rally?

What about when the reported numbers are supressed by 10% or more only to be 'upwardly revised' for the next couple months. Novembers numbers were upwardly revised by 10% this morning and Octobers were raised FOR THE SECOND TIME! I wonder how the market would have reacted to both of those jobs reports had the right number been released rather than a much lower number?"

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#2) On January 09, 2009 at 12:42 PM, Mary953 (66.50) wrote:

Deej,  Our community is already seeing mass plant "temporary layoffs" - as in workers who are still on extended unpaid Christmas vacation.  The most stable positions in the area at this time are the bank collection positions.  They have plenty to do. 

Two types of real estate are doing well;  the 'roach motels' that charge $200/week and the very inexpensive homes (auction, foreclosure, very old, extreme bad repair).  Most of these houses are bought very quickly by those who flip houses.  It is a struggle to catch one that you can buy to live in.  Apartments, being the only option left, have raised their rent by several hundred dollars a month.

Microfilm newspapers showed that into 1930-31 this area was being reassured that "the problem" would not hit here.  When the effects hit, they came in the form of city residents from other states seeking areas with food and room.  Chaos was a mild term for the results.  I believe we would first see a separation of sorts between the two groups.  I am already seeing it on this site.  Big city experience opposed to smaller communities or less heavily populated areas.  The rules are very different, both in the way you act and the way you expect others to act.  It would be a difficult adjustment if we ended up jostled together against our will.  Societies function smoothly (and sometimes only barely that) by shared understanding of what is accepted and what is not.

May I share with you a fascinating thread that was posted while the rest of us slept?  I have read it and it should be referenced by someone, but I have resolved to cut back a great deal on my use of this site.  Alstry's antics have claimed one more victim.  I prefer to leave the big city chaos and this site to him and remain in my backwater community.  His last comment about me crossed the line.  I am out of it.  This blog is also proof that the level of discussion can soar amazingly high if I am not participating.  I wish you the best.  I know you will have the following to draw attention to a discussion that should be read by the serious members of this site.  Thanks.  Mary

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=127943&t=01007820309211448063

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