Mixed Opinions On Fiday’s Unemployment Reportby Tim Manni
There’s more than one way to interpret Friday’s unemployment report. While some market observers are grimacing over the escalating unemployment rate, others are encouraged and upbeat over the abating number of layoffs and the improvement in certain sectors like construction. On the surface, May’s report could seem confusing.
Despite the loss of 345,000 jobs in May — the smallest number on record since September — the unemployment rate increased by 0.5% to 9.4%, the highest jobless rate in 26 years.
The reason the unemployment rate continues to rise despite the steady decline in layoffs is because the unemployment rate is a lagging indicator. Experts predict that unemployment will increase even more in the coming months — possibly into the 10% range before too long (if the rate continues to jump at its current pace, we can expect double-digit unemployment by mid-July).
The Good News
May’s decline in payrolls rang in far below analysts’ expectations. The experts at MarketWatch.com, Bloomberg, and Moody’s all predicted layoffs in the 500,000 range. The construction sector — an industry ravaged by the housing crisis — lost 59,000 jobs in May, the fewest since September and nearly half as many as in April, according to Moodys.com.
The Bad News
The real dark cloud over May’s job report is the unemployment rate which is rising at an unsettling pace. Remember, back in January the Congressional Budget Office predicted that the unemployment rate would exceed 9% by early 2010. Unfortunately we’ve reached that number a year early — scary stuff. Those out of work are remaining unemployed for longer periods of time. Not since 1983 have more Americans been laid off for longer than six months at a time.
Besides the unemployment rate and the overall sum of losses, there are several other indicators mixed into this monthly report that provide windows to the plight of those lucky enough to remain employed. The average American work week has shrunk to a record-low 33.1 hours, and the number of workers forced into part-time has increased by 164,000 to 9.1 million.
Again, today’s report brings with it a mixed bag of emotions. There’s no one number to focus on in this report that will tell you the whole story. Don’t get us wrong, the shrinking unemployment number is encouraging, but the growing jobless rate means that employment will be one of the late bloomers in our journey to economic recovery.