If you watch the news, it looks as if the recession may be grinding to a halt.
But it sure doesn’t feel like it.
[img]544|left|||no_popup[/img]
Especially if you’re one of the millions who has lost his job or is on edge because the axe may still fall.
The stock market has rallied 30 percent since hitting a low water mark in March. Even productivity is on the rise.
But the real story of the economy still is dominated by employment.
Although unemployment is still on the upswing, based on the numbers alone, it looks as if the pace of joblessness is starting to slow. During May, the U.S. private sector shed 532,000 jobs. This compares to a 539,000 drop in employment for April.
Initial jobless claims also fell in May. For the week ending May 30, the newly unemployed seeking jobless benefits shrank by 4,000, to 621,000.
Playing with Numbers
According to the U.S. Labor Dept. report out this morning, this is the first time in almost five months that new claims declined, breaking a string of 17 consecutive records.
Unemployment remains at 9.2 percent nationally, a 25-year high. Employment, which generally is a lagging economic indicator, is expected to peak in the neighborhood of 10.5 percent during 2010. Jobless figures in some of the hardest hit regions, such as the Rust Belt areas of the Northeast, Michigan and California, could reach as high as 13 percent before the worst is over.
To date, the U.S., which remains the world’s largest economy has lost 5.7 million jobs since the recession began in December 2007. Based on the numbers alone, this is the biggest employment slump in any post-war economic downturn.
Boosting the bottom line, however, has been job one for U.S. companies fighting to survive the most pernicious recession since the 1930s. In addition to trying to squeeze more productivity from fewer employees, American companies, like their foreign counterparts, have been furiously struggling to get excess inventories under control.
The Survivors’ Impressive Work Ethic
Productivity, the measure of hourly worker output, actually climbed to an annual adjusted rate of 1.6 percent, nearly double the figure from last month. This jump in efficiency appears to show that as U.S. businesses cut costs, companies were more successful in extracting more output from their remaining workforce.
While the consumer spending and housing components of the economy have yet to stabilize, U.S. manufacturers are trying to get ahead of the curve by bringing their inventories in a better alignment with actual demand.
This will help manufacturers and suppliers retain their per- unit profitability, and should eventually restore the incentive to reverse the current economic contraction.
[img]545|left|||no_popup[/img]
In his testimony yesterday before the House Budget Sub-committee, Fed Chair Ben Bernanke told members of Congress that his projections regarding the depth of the recession, and any rebound, still largely depend on the health of the financial sector. Bernanke warned that any “relapse in the financial sector would be a significant drag on overall economic activity and could cause the incipient recovery to stall.”
In other words, during the next several months, the Fed will likely continue its active financial support and intervention into the nation’s banks.
Bernanke openly acknowledged that it was hard to judge what effect the $800 billion stimulus bill will have on U.S. growth. Regardless of the impact, the Fed Chair registered his mounting concern about the widening U.S. budget deficit. He urged the members to keep their attention fixed on the ratio of the federal debt in relation to the Gross Domestic Product (GDP).
With Treasury Secretary Tim Geithner finishing up his swing through Asia, where his chief mission was to assure our biggest creditor, China, that we would make good on our markers, Bernanke continued to express his grave concern over the growing level of indebtedness associated with the federal recovery efforts.
Now, as Diploma Season approaches, more graduates will be hitting the bricks looking for both summer jobs and careers.
When these new jobseekers enter the already diminished employment market, it will create an additional layer of competition for the recently unemployed, and could lead to a significant short-term reduction in entry level pay.
Mom and dad beware. Your hobby rooms may be in danger.
With the job economy still shrinking, the kids may be home for more than just the summer.
John Cohn is a senior partner in the Globe West Financial Group, based in West Los Angeles. He may be contacted at www.globewestfinancial.com
