Diane Swonk, Chief Economist
Nov. 6, 2009 – 7:40 a.m. CT
Employment Losses Abate: Close to a Tipping Point
Non-farm payrolls contracted by another 190,000 in October, which marks a slowdown from upwardly revised data for September and August – but is still far from where we want to be.
The unemployment rate surged to 10.2% in October; over 15 million people are out of work – 5.6 million for more than six months. Shadow unemployment, which includes discouraged workers who have given up and those who are working part-time while looking for full-time employment, is well into the double digits and approaching 20%, which we may see before the labor market really turns.
Those more than five million workers who have been out of work for more than six months have prompted yet another extension of unemployment insurance this week. Larry Summers, director of the White House's National Economic Council, recently commented that the chance of getting workers back into the labor force once they have been out for more than a year is well below 50%, so the clock is clearly ticking.
The good news is that there does appear to be some shifting in economic conditions. Temporary employment and hours worked increased slightly, which points to hiring down the road. A surge of cash on the balance sheets of large firms is also encouraging, as they will eventually have to put that cash to work via investment and hiring. The hurdles that small businesses still face, however, suggest than any turn in employment that we do eventually see will be extremely muted (e.g., we will not generate enough jobs to bring the unemployment rate down to "comfortable levels" for some time to come; our own analysis suggests that it will take until 2013-2014 for unemployment to drop below 6%).
On net, the recovery is about as rocky as it gets and won't help Main Street for some time. We are still hoping for a small turn in employment around the New Year, but we're not holding our breath at this time.
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