Update: Unemployment Numbers

Tags: cl, jnj
10 Jan 1:27am
Posted by ZacksResearch
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As a bad as a loss of 524,000 jobs in December and a jump to 7.2% on the unemployment rate are, the job-loss numbers were roughly inline with the consensus estimates, and better than the 'whisper number.' However, don't break out the bubbly yet, because below the surface things were very ugly indeed.

For starters, both October and November were revised sharply lower, for a total of 154,000 additional lost jobs. That brings the total over the last four months to 1.9 million, and the loss for the year to almost 3 million. That's the biggest one-year job loss since 1945, folks, and I didn't notice any demobilization from a world war going on lately.

There are now 11.1 million unemployed people in the country, a rise of 3.6 million over the last year. Of those, 2.6 million are long-term unemployed -- out of work for over 27 weeks -- a figure that has doubled over the last year. The number of people who are working part-time for economic reasons is also skyrocketing (see chart below).  That is, they want to work full-time but can only find part-time work, or who have had their hours cut back. This number has reached a total of 8.0 million, a figure that is up 3.4% year over year.

Add in the rest of the folks who are marginally attached to the labor force, such as the discouraged workers, and you have an 'underemployed' rate (U-6 as opposed to the official U-3 number, for those of you who read the BLS releases) of 13.5%, up from 12.2% in November and 8.7% a year ago.

The average weekly hours fell to 33.3, down 0.2 from November and an all-time record low. Weekly hours is often a leading indicator of future employment trends, since employers will often try to hold onto workers by first cutting hours, and then only later resorting to pink slips.

Job losses were widespread and affected just about every sector of the economy. The only exceptions were Education & Health Care, which added 45,000 jobs, and Government, which added 7,000. The service sector lost 273,000 jobs overall, mostly due to declines at professional and business services of 113,000 (mostly temp workers, down 81,000) and in Retail, down 67,000. Goods-producing jobs continue to disappear, down 251,000 over all, with 101,000 lost in Construction and 149,000 lost in Manufacturing.

All in all, a very ugly report, and I suspect January's report will be even worse. Keep in mind that in the last two recessions the employment situation did not improve for more than a year after the downturn officially ended. The real economy is only starting to feel the pain that was baked into the cake in the credit freeze-up last fall.

It is going to get much worse before it gets better. Keep your equity portfolios weighted towards companies that make the stuff people have to buy no matter if they are employed or unemployed -- for example, Colgate (CL) or Johnson & Johnson (JNJ).



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