Many economic measures for September have been released the last two days and they are all worse than August. Manufacturing activity still expanded slightly but at a slower rate than August. [Note: it says fell but that means the number went down. It was still above 50, signaling expansion. I hate their terminology as it was saying it “rose” six months ago when it went from 40 to 42.] However, factory orders fell as well, signalling the possibility of outright contraction starting this month.
And of course jobs: worse last month, worse this week and worse going forward. There is a tidbit in the first link in that last sentence that is astounding:
“Note: The the preliminary benchmark payroll revision is minus 824,000 jobs. (This is the preliminary estimate of the annual revision – this is very large).”
Unemployment calculations are insanely complicated, but part of it (which is new since 2002) is to have a model that predicts the net jobs created by small businesses that are not captured by the usual data (total created by small business – total lost to them failing). There are tons of measurements that show small business creation is way down and small business failures are rising, yet the model consistently shows a positive amount each month. In all, it’s added about 1 million jobs since the beginning of the recession. For the revisions they go back and look at better data (payroll taxes maybe? I’m not entirely sure actually) that is supposed to correct for both the model and the fact that the initial report is based on a sample and extrapolated. What that sentence means is that the January 2010 report (released the first Friday of February) is estimated to show -824,000 jobs throughout this year that should have been captured.
“The preliminary estimate of the benchmark revision indicates a downward adjustment to March 2009 total nonfarm employment of 824,000 (0.6 percent).”
This means that the unemployment rate should probably be closer to 10.2-10.4% already. While it’s inaccurate to add those numbers together because the unemployment rate is dependent on a different survey of how many people are looking for work, etc., the official payroll decline in the recession thus far is 7.2 million, so we’re undercounting by over 10%.
In any case, there are few signs of increased economic activity on the horizon. The GDP number for Q3 will be huge, perhaps over 4%, but that is due to fake mathematical characteristics in the number. The amount of actual economic activity has stopped dropping, but has flatlined the last few months except for cash for clunkers and other extreme one time events. Moreover, while housing prices have briefly stabilized, there are 7 million homes waiting to be foreclosed upon based on delinquency numbers.
I must admit, I’ve been pleasantly surprised by how well the government has kept things together (as much as I’ve been angry and saddened by their inability to fix any of the long term structural problems) but without more government intervention, it looks like we are going to head into a second downturn into the holiday season. It’s true that most of the actual stimulus projects haven’t started yet (wasn’t that always the criticism of them) but those are going to employ comparatively few people. In a recent post I predicted that continued unemployment deterioration would lead calls to for a New New Deal (at least the WPA aspect). Former Labor Sec Robert Reich calls for that today. While he is solidly Liberal, he’s hardly a radical, and is becoming a rather potent voice for mainstream Democrats.
Update: Mish has a few other points.
The civilian labor force participation rate declined by 0.3 percentage point in September to 65.2 percent. The employment-population ratio, at 58.8 percent, also declined over the month and has decreased by 3.9 percentage points since the recession began in December 2007…
In a typical recovery, the participation rate should go up not down. The reason is people hear there is a recovery, hear things are getting better, hear the talk about “green shoots” and think there might be a job if they go looking.
Instead we see the participation rate drop by .3 and the civilian labor force drop by 571,00 workers. In normal condition, the civilian labor force ought to be growing by 120,000 a month due to increasing population and immigration.
Is this a “recovery”?
If the labor force participation rate hadn’t been plunging like it has been, we’d see unemployment north of 12% by now.
Update #2: I said I wasn’t sure how the revisions were calculated but this Bloomberg article notes it:
Once a year, the Labor Department revises its payroll figures after combing through tax records from the unemployment insurance program that covers practically all businesses. Those records are only available after a lag, explaining why it takes more than a year to make the tabulations.
It also has an indepth description of the process.