Forget Friday's headline jobs number, weekly jobless claims & U6 point to continued improvement in the labor market
I don't care what the headline monthly unemployment report that the BLS released last week said, behind the scenes the jobs situation continues to improve.
In a post that I wrote in late September titled Has the Permabear's favorite employment statistic already peaked? I talked about how the permabear's favorite employment statistic, U6 aka "Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers" may have already peaked.
Once again we saw an improvement in U6 in September. It peaked at 16.8% in June, fell to 16.5% in August, and fell again to 16.1% in September.
I'll reiterate what I believe this improvement in U6 means because I believe that it is extremely important:
How is it possible for U6 to have peaked when the main unemployment rate is still rising you ask? Well, I'll tell you (even if you didn't ask ;) ). Remember that the U6 statistic includes people who are "employed part time for economic reasons." The first thing that companies do when the economy begins to recover isn't run out to employment agencies to try to find new employees. Instead they increase their labor input by bringing part-time workers back on full-time. This may be what we are seeing happening right now. The record number of people working part-time when they would rather be working full-time has stabilized and is slowly beginning to fall.
The fact that part-time workers are being called back to full-time work may be a leading indicator that a peak in the main unemployment number is just around the corner and a sign that the economy is improving, albeit slowly.
Another positive sign on the labor front was this morning's weekly jobless claims. The claims number dropped 33,000 week-over-week to 521,000.
Here's an excellent chart from Calculated Risk that shows the improvement in weekly claims:
The employment situation obviously is still a mess, but I am not nearly as concerned about it as I was about it as long as we continue to see gradual improvement in the numbers. We are slowly closing in on the 400,000 level that is thought to be key barrier between labor contraction and expansion.
From a personal anecdotal perspective, my company has more meetings with potential new clients over the next month than we have had over the past year combined. Now I'd like to think that all of this potential new business is solely because of all of my excellent management and hard work, but I must grudgingly admit that an improvement in the economy may have had some impact.
I'm not a raging bull on the economy, but I do think that we will return to growth, sub-par growth compared to what we have become accustomed to but growth nonetheless, some time in 2010.
In other positive economic news this morning,
Retailers' Same-Store Sales Top Estimates