Jan. 21, 2010 – 8:50 a.m.

Don't Hold Your Breath for a January Surge in Employment

Jobless claims swelled back above 480,000 in the most recent week, and although much of the increase could be attributed to an undercount over the Martin Luther King holiday, the trend in the data is still discouraging. Many were hoping jobless claims would be closer to the 350,000 level by now, which would be more consistent with job growth, instead of the 450,000-plus threshold, which is more consistent with a slowdown in the pace of layoffs. Hopes for a positive employment number in January, in particular, are rapidly dimming.

The only near-term bright spot is hiring for the 2010 census, which will add about three-quarters of a million workers to government payrolls between now and mid-year, with the first real surge occurring in March. Those jobs are not permanent, but at $20 per hour, they are better than unemployment insurance. More importantly, those jobs will, at least temporarily, re-introduce many of the long-term unemployed back into the labor force, which will help stem the rise in displaced and disenfranchised workers going forward (the longer a worker stays unemployed, the higher the probability that he/she will give up entirely).

The Bottom Line: Those betting that the firms that panicked during the height of the crisis will now repent and rehire might want to rethink their positions. Financial crises are inherently harder to recover from than recessions engineered by the Fed. Nowhere is that empirical fact clearer than in the slow pace of healing that is occurring in the labor markets. Employment will increase over the course of the year, but not enough to bring the unemployment rate down by a whole lot.

Incumbents beware.

© 2010 Mesirow Financial Holdings, Inc. ("Mesirow Financial"). All rights reserved.

The information in Diane Swonk's Fed Flash is the proprietary and copyrighted material (the "Copyrighted Material") of Mesirow Financial. The Copyrighted Material, or any portion thereof, may not be reproduced, retransmitted or submitted to any media outlet, or posted on any Web site aside from mesirowfinancial.com without the express written consent of Mesirow Financial. This information provided here in is believed to be obtained from sources deemed to be accurate, timely and reliable. However, no assurance is given in that respect. The reader should not rely on this information in making economic or other decisions. The views expressed herein are those of the author and may not necessarily represent the views of Mesirow Financial, its operating businesses or other of its employees. This communication does not constitute an offer or solicitation, or solicitation of any offer to buy or sell any security, investment or other product. Likewise, this communication serves to provide certain opinions on current market conditions, economic policy or trends and is not a recommendation to engage in, or refrain from engaging, in a particular course of action.