Today, the Department of Labor released their latest read of Joblessness showing seasonally adjusted “initial” unemployment claims declined significantly dropping 47,000 to 522,000 from last week’s upwardly revised 569,000 claims while “continued” claims collapsed dropping 642,000 resulting in an “insured” unemployment rate of 4.7%.
Well, the mid-July non-seasonally adjusted (NSA) spike is here and what wonders it has worked on the headline numbers.
Clearly, I misjudged the dynamic.
So, NSA initial claims jumped to their highest level since February and the NSA continued claims climbed to a near peak level comparable to values seen just a couple weeks ago BUT the seasonal adjustment is teasing out a peaking trend.
These series were exceptionally good at forecasting the recession and during all the Bullish brouhaha and nonsense of late 2007 and early 2008, I relied on them to disclose the reality of the trend in the job market and wider economy.
With today’s results it’s becoming more obvious that the massive initial inflation phase to unemployment has likely peaked out.
Now, looking at past cycles (especially the last two recessions), this does not imply that the pain is over in the job markets… we are still seeing a level of literal initial weekly jobless claims (non-adjusted series) well over 550K.
If history is to be at least a rudimentary guide, first time and continued unemployment claims will likely remain unusually high for at least another year or two (… as they had in the aftermath of both the early 90s bust and the dot-com bust).
Given the fragile state of the economy and the substantial financial stress being felt by so many millions of households, there are serious headwinds to any sustained recovery.
Further, the continuing claims series continues to present the clearest picture of what is likely to be one of the most problematic aspects of this period of economic crisis namely how to make an immense and growing number of highly specialized (college educated) service/professional service workers productive again.
It’s obvious now that we have reached the first real test of our majority services-based economy.
Unlike the “tech-wreck” of 2000-2002, our current downturn is very broad, leaving no sector and virtually no corner of the country untouched.
With millions of college educated workers now on the market incomes will clearly suffer but moreover, it will be soon all too clear that our prior bubble economy significantly overproduced service workers (particularly professional service workers) for which current employment opportunities will be scant resulting in continued and fundamental vicious-cycle effects.
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