Announcement

Collapse
No announcement yet.

Jobs crash arrives on schedule - Eric Janszen

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Jobs crash arrives on schedule - Eric Janszen

    Jobs crash arrives on schedule

    July 2, 2008 in our state by state U.S. unemployment forecast Housing Bubble Correction Update: Fasten your seat belts, here comes the jobs crash we said, “The rate of growth in unemployment in some states may shock you...” In November 2008 we published our industry sector analysis of future unemployment Unemployment by industry: Brace for Impact that concluded, “In total we see the US economy losing between seven and 13 million jobs by the end of 2009 representing a 5% to 10% increase in unemployment.” Investors who got sucked into the early year rally (see Beware Relief Rallies Update 1: DJIA 7552 the Debt Deflation Bear Market bottom?) took a beating today when the two "surprising" unemployment reports shocked the market, producing a 245 point drop in the DJIA on the news. This story was typical.
    NEW YORK (Reuters) - Job losses and plans to lay off workers hammered the struggling U.S. economy in the final month of 2008, according to private reports that could foreshadow surprisingly grim labor market data from the government on Friday.

    U.S. private employers shed 693,000 jobs in December, up sharply from the revised 476,000 jobs lost in November and far more than economists estimated, a report by ADP Employer Services said on Wednesday.

    "This is shockingly awful," said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York. - Private job losses mount, ominous for payrolls, Burton Frierson, Reuters, January 7, 2009
    If job losses continue this year at the December 2008 rate reported today the U.S. may see eight million jobs lost in 2009, near the lower end of our seven to 13 million forecast. From that perspective, today's data could be taken as encouraging, except that a review of our per-industry and per-state forecasts from last year indicate troubling signs that lead us to conclude that the monthly rate of job losses will accelerate rapidly early this year, led by retail trade sub-sector of the services sector that was hammered by weak consumer demand during the usually busy holiday shopping season, and piled onto by the now staggering energy and agriculture sectors that were previously supported by a weak dollar that surged toward the end of 2008, cutting foreign demand for U.S. exports.

    Four states are representative of our unemployment growth thesis: Housing Bubble Ground Zero states Florida and California, FIRE Economy employment dependent New York state, and the Energy and Food Inflation state of Idaho. Idaho is among a few states that we called out as potential bright spots in our otherwise gloomy per-state unemployment forecast. The surging dollar forces us to revoke even that small glimmer of promise in the post FIRE Economy collapse.

    Forecast July 2008

    Ground Zero state
    National Unemployment Growth Rank: 4
    Macro-economic Vulnerability: High
    Unemployment Growth Rate: High
    Estimated Post Recession Peak Unemployment Rate: 10%
    Future Home Values Rating: Poor

    Actual January 2009



    Reassessment: With unemployment already pushing 8.5% from 6.5% at the time of our previous forecast, we are revising our forecast for CA unemployment to peak at 12% versus 10%.

    Forecast July 2008

    Ground Zero state
    National Unemployment Growth Rank: 2
    Macro-economic Vulnerability: High
    Unemployment Growth Rate: High
    Estimated Post Recession Peak Unemployment Rate: 10%
    Future Home Values Rating: Poor

    Actual January 2009


    Reassessment: With unemployment close to 7% from 5.5% at the time of our previous forecast, we are holding to our forecast for FL unemployment to peak at 10%.
    Forecast July 2008

    Ground Zero state
    National Unemployment Growth Rank: 33
    Macro-economic Vulnerability: High
    Unemployment Growth Rate: High
    Estimated Post Recession Peak Unemployment Rate: 8%
    Future Home Values Rating: Poor

    Actual January 2009


    Reassessment: With unemployment above 6% from 5% at the time of our previous forecast, we are raising our forecast for NY unemployment to peak at 10% versus 8%.

    Forecast July 2008

    Energy and Food Inflation State
    National Unemployment Growth Rank: 9
    Macro-economic Vulnerability: Moderate
    Unemployment Growth Rate: Moderate
    Estimated Post Recession Peak Unemployment Rate: 7%
    Future Home Values Rating: Fair

    Actual January 2009


    Reassessment: With unemployment rising very rapidly from 3.5% from 6.5% at the time of our previous forecast, we are revising our forecast for ID unemployment to peak at 10% versus 7%.

    In addition to the state by state upward revisions to our unemployment forecast, the national picture shows that we are in early innings of the job loss process. Unemployment is a lagging indicator that has since the start of the FIRE Economy era in the early 1980s tended to continue to rise for six months or so after a recession ends. We attribute this to a combination of changes in unemployment reporting as well as the dynamics of monetary policy in the asset price inflation based growth FIRE Economy; business expansion that increases labor demand is a secondary effect of asset price inflation. In the post FIRE Economy era, we expect to see unemployment rates exceed 1980s recession rates, and coincident with the contraction rather than lagging. The rate of growth in unemployment is not likely to slow until stimulus takes effect in 2010.



    Unfortunately, as dreadful as today's employment data are, readers should expect to see unemployment rising in every sector and state of the U.S. economy and see job losses increase to a rates as high as 1 million per month this year. Fortunately, as an iTulip reader you are financially prepared. If you are new here then at least you will be psychologically prepared. Here is our best estimate of where we think out favorite leading unemployment indicator, median duration of unemployment, will be mid year. We will return to this chart for comparison to forecast later this year.


    Projected rise in Median Duration of Unemployment by June 2009: 13 weeks from 10.5 weeks currently

    Eventually we'll work out way out of this mess, of course. Small private companies not big public companies will, as always, pull the U.S. economy out of recession. Tax cuts targeted at the private business sector of the US economy are urgently needed. Fiscal stimulus must aim to provide a return on investment not merely create jobs, otherwise the nation will be left with more debt but with no greater capacity to pay it.

    iTulip Select: The Investment Thesis for the Next Cycle™
    __________________________________________________

    To receive the iTulip Newsletter or iTulip Alerts, Join our FREE Email Mailing List

    Copyright iTulip, Inc. 1998 - 2009 All Rights Reserved

    All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Nothing appearing on this website should be considered a recommendation to buy or to sell any security or related financial instrument. iTulip, Inc. is not liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. Full Disclaimer
    Last edited by FRED; 01-08-09, 08:05 AM.

  • #2
    Re: Jobs crash arrives on schedule - Eric Janszen

    Originally posted by EJ View Post
    The rate of growth of unemployment is not likely to slow until
    Great analysis as always, thanks for the update. Care to finish this quoted sentence however? I hate cliffhangers! ;)

    Comment


    • #3
      Re: Jobs crash arrives on schedule - Eric Janszen

      [quote=EJ;69807]



      in the big pink recession shade hypothetical period 2008-2010 is the political shit sandwich of the century, i'd say. i'd extend the pink well into 2010... but that's just me.

      Comment


      • #4
        Re: Jobs crash arrives on schedule - Eric Janszen

        Should the chart for the jobs loss projection for the US as a whole read "2011" at the bottom as opposed to "2010"? If 2010 is correct, you seem to be looking at unemployment peak at mid 09' in which case -according to you (lagging indicator)- the recession should be ending soon as we are now 6 months prior to the peak on that chart. If 2011, then the cycle moves 1 year forward and you are estimating the end of this recession at 4Q09.

        Comment


        • #5
          Re: Jobs crash arrives on schedule - Eric Janszen

          Originally posted by EJ;69807...[SIZE=3
          Jobs crash arrives on schedule[/SIZE]

          ...If job losses continue this year at the December 2008 rate reported today the U.S. may see eight million jobs lost in 2009, near the lower end of our seven to 13 million forecast. From that perspective, today's data could be taken as encouraging, except that a review of our per-industry and per-state forecasts from last year indicate troubling signs that lead us to conclude that the monthly rate of job losses will accelerate rapidly early this year, led by retail trade sub-sector of the services sector that was hammered by weak consumer demand during the usually busy holiday shopping season, and piled onto by the now staggering energy and agriculture sectors that were previously supported by a weak dollar that surged toward the end of 2008, cutting foreign demand for U.S. exports...


          ...In the post FIRE Economy era, we expect to see unemployment rates exceed 1980s recession rates, and coincident with the contraction rather than lagging. The rate of growth in unemployment is not likely to slow until stimulus takes effect in 2010...

          ...Unfortunately, as dreadful as today's employment data are, readers should expect to see unemployment rising in every sector and state of the U.S. economy and see job losses increase to a rates as high as 1 million per month this year...
          The Economic Club of Canada holds an annual Economic Outlook event and invites the chief economists from the Big 5 Canadian Banks to share their views of the coming year. The 2009 event was this morning in Toronto. Attending this year: Sherry Cooper, Chief Economist, BMO Capital Markets; Don Drummond, Chief Economist, TD Bank Financial Group; Warren Jestin, Chief Economist, Scotiabank; Avery Shenfeld, Senior Economist, CIBC World Markets; and Craig Wright, Chief Economist, RBC Financial Group.

          The highest estimated forecast for job losses in the USA in 2009 [that I heard] was 4 million, from TD's Don Drummond. The pundits have a ways to go to catch up with iTulip...

          Comment


          • #6
            Re: Jobs crash arrives on schedule - Eric Janszen

            Sorry folks. I decided to pull this as anyone visiting whom I talked to while conducting my research may not appreciate having the info posted to a blog. xoxo
            Last edited by Chief Tomahawk; 01-09-09, 08:15 AM.

            Comment


            • #7
              Re: Jobs crash arrives on schedule - Eric Janszen

              As always, very nice analysis.


              Originally posted by EJ View Post
              Small private companies not big public companies will, as always, pull the U.S. economy out of recession. Tax cuts targeted at the private business sector of the US economy are urgently needed.
              Why? You believe there will be a sharp increase in unemployment, which will crush demand for products. What would you expect the small businesses to do with the tax cuts? Expand production capacity when they already have excess capacity? Increase inventories?

              Seems the government needs to address the demand side 1st. By investing in Alt-E and infrastructure for a new transportation and energy transport system, the government would create jobs, and thus demand across the productive economy, while at the same time saving billions in future budgets.

              I really am curious as to why a tax cut for small businesses, at this time, should require such urgency?

              Comment


              • #8
                Re: Jobs crash arrives on schedule - Eric Janszen

                Originally posted by Chief Tomahawk View Post
                Well, I gave ITulip a plug this past weekend. With my host home ill, I ventured to Cheetah's in San Diego.

                One dancer said she was just about to buy an '04 car. I told her to wait until August as the glut of new cars was going to squish the pricing in the used car market. She was quite pleased to hear a cheaper price might be in the offing.

                To another, we chewed the fat about the economy for awhile (20 minutes). She said she used to make $700+ a night easy, but that's fallen off to $500 and now she struggles to make $300. I told her economics (er following it) is a hobby of mine and supplied her with Itulip, Barry Ritholtz, Calculated Risk, and Michael Shedlock's (aka MISH), as a bevy of mostly free info. Specifically, I told her about EJ's call to sell the market last December and Ka-Poom theory. (Also told her about BR's Bear Stearns and Lehman calls). She asked whether EJ takes questions and wanted to know about when it would be a good time to buy a particular brand of boots. I told her to come onto the blog and post her picture (head shot only, but you can rest assured the rest of her would make most normal guys howl at the moon...) with her comment and she'd get all kinds of attention (and hopefully get the question answered).

                Last, I think this was the perfect place to take the pulse of (questionable???) discretionary spending. Monday night, there were 35 women working and 30 guys. The bulk dance price fell from 5 for $100 to 8 for $100, and this was supposedly the top club in SD. I wonder what it will be by March or April?
                Now that is what I call "front line info".

                Some forecasters - including Faber - will take into account comments and opinions of "Madams" (i.e. heads of less glamorous institutions) to assess current economic conditions.

                I think this is a brilliant idea as I am sure they know more than Ben and Jim (Canada's equivalent of Ben) about the state of the economy...

                As for me, my situation clearly precludes this sort of "studies", but it is always interesting to hear from the front lines...

                Comment


                • #9
                  Re: Jobs crash arrives on schedule - Eric Janszen

                  EJ, thanks for the update and analysis. However, I believe Fred just recently gave figures of U3 going to 20% on a national basis.

                  Could you or he give some clarity on this for us? Thanks

                  Comment


                  • #10
                    Re: Jobs crash arrives on schedule - Eric Janszen

                    Originally posted by BobH View Post
                    EJ, thanks for the update and analysis. However, I believe Fred just recently gave figures of U3 going to 20% on a national basis.

                    Could you or he give some clarity on this for us? Thanks
                    I believe that Fred stated 20 percent U-6 for 2009 and 26 percent U-6 for 2010.

                    20 percent U-3 would probably bring the U.S. into a total anarchy and martial law environment. Actually, 20 percent U-3 will probably be very close to those conditions regardless.

                    Comment


                    • #11
                      Re: Jobs crash arrives on schedule - Eric Janszen

                      No, Fred responded to U3 numbers.

                      Comment


                      • #12
                        Re: Jobs crash arrives on schedule - Eric Janszen

                        Originally posted by Chief Tomahawk View Post
                        Well, I gave ITulip a plug this past weekend. With my host home ill, I ventured to Cheetah's in San Diego.

                        One dancer said she was just about to buy an '04 car. I told her to wait until August as the glut of new cars was going to squish the pricing in the used car market. She was quite pleased to hear a cheaper price might be in the offing.

                        To another, we chewed the fat about the economy for awhile (20 minutes). She said she used to make $700+ a night easy, but that's fallen off to $500 and now she struggles to make $300. I told her economics (er following it) is a hobby of mine and supplied her with Itulip, Barry Ritholtz, Calculated Risk, and Michael Shedlock's (aka MISH), as a bevy of mostly free info. Specifically, I told her about EJ's call to sell the market last December and Ka-Poom theory. (Also told her about BR's Bear Stearns and Lehman calls). She asked whether EJ takes questions and wanted to know about when it would be a good time to buy a particular brand of boots. I told her to come onto the blog and post her picture (head shot only, but you can rest assured the rest of her would make most normal guys howl at the moon...) with her comment and she'd get all kinds of attention (and hopefully get the question answered).

                        Last, I think this was the perfect place to take the pulse of (questionable???) discretionary spending. Monday night, there were 35 women working and 30 guys. The bulk dance price fell from 5 for $100 to 8 for $100, and this was supposedly the top club in SD. I wonder what it will be by March or April?
                        I left Mexico (Monterrey) two months ago and could see the change in this particular business environment. I was there for five months and the difference in the declining income stream for these girls within that time period was profound.

                        I am heading back in April for seven months. Can't wait. Disinflation can be a good thing for hobbies such as this. Better if we encounter deflation.

                        But then again, I think that things are so bad that the correct wording is purely semantics at this point.
                        Last edited by Quincy K; 01-08-09, 04:27 PM.

                        Comment


                        • #13
                          Re: Jobs crash arrives on schedule - Eric Janszen

                          Originally posted by BobH View Post
                          EJ, thanks for the update and analysis. However, I believe Fred just recently gave figures of U3 going to 20% on a national basis.

                          Could you or he give some clarity on this for us? Thanks
                          Are you referring to my comment here?



                          U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate)

                          Current: 6.5%
                          2008: 8%
                          2009: 13%
                          2010: 20%

                          That's 13% U3 by the end of 2009, 20% by the end of 2010.

                          On the low end of the forecast, starting 2009 at 7% plus a 5% rise during the year gets us to 12% by year end. On the high end, 7% plus 10% gets us to 17% by the end of 2009.
                          Ed.

                          Comment


                          • #14
                            Re: Jobs crash arrives on schedule - Eric Janszen

                            Originally posted by FRED View Post
                            Are you referring to my comment here?


                            U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate)


                            Current: 6.5%
                            2008: 8%
                            2009: 13%
                            2010: 20%

                            That's 13% U3 by the end of 2009, 20% by the end of 2010.

                            On the low end of the forecast, starting 2009 at 7% plus a 5% rise during the year gets us to 12% by year end. On the high end, 7% plus 10% gets us to 17% by the end of 2009.
                            Jump Ball ETA?

                            Comment


                            • #15
                              Re: Jobs crash arrives on schedule - Eric Janszen

                              Thanks, Fred ... yes, that's the one!

                              EJ has a 'peak' number for the worst states at 12%. Can you help clarify your differences?

                              Comment

                              Working...
                              X