December 14, 2009
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<US Labor market in November-2009>
In broad terms, some headline figures for US labor market showed initial signs of stabilizing in November-2009 : Unemployment rate edged down, jobs cut almost eased. But some underlying fundamentals remained very weak (e.g. long-term unemployment)
Unemployment rate dropped slightly to 10% from 10.2% in October. An encouraging sign. This is the second time in this year where unemployment fell while company still cut jobs. It is too early to judge whether jobless rate has already peaked. But as you can see in previous hikes, peak in unemployment rate is really “steep”, instead of being a plateau.
By and large, it is more prudent to wait for 1 or 2 months to judge whether 10.2% in October is the peak for this cycle.
At the same time, companies cut less jobs in November, only -11k (at the same time, figures for Sep and Oct are revised, showing less jobs cut). Note that companies still cut jobs, but at a lesser pace. Since recession in January-2008, US lost a total 7.2 mn jobs, about the whole population of Hong Kong.
In a recent interview, Greenspan expected companies to add jobs very soon; but unemployment rate could still rise, seeming paradoxical (but it is not). See the interview and Greenspan’s explanation here.
What has been bothering me, and still being unresolved, is the long-term unemployment. Both the number of long-term unemployed (individuals unemployed for at least 6-months) and the average duration of unemployment broker record, again.
About 38% of unemployed are long-term ones; over 860k unemployed dropped out of the labor force (800k last month)
Greenspan in the above interview highlighted the risks of long-term unemployment (again) :
These people are losing their skills…It is very critical that those people have the skills when the economy comes back or we will not be as productive as we ought to be.”
Hours of work eventually rose, after hovering around record low for quite a number of months. Good initial sign.
But wage growth continued to decelerate (from 2.5% yoy in October, to only 2.2% in November).
Given that in labor market, quantity adjusted first and then pricel; that is to say, jobs are adjusted first, salary adjustment lag behind, we could have ongoing deceleration in wage growth.
When recession ended (shaded regions denote recession), unemployment rate would have peaked or soon peaked…
But wage growth continued to decelerate even way after recession is over…In the recession of 2001, wage growth slowdown did not stop until 2004.
