Another Bleak U.S. Labor Market Report

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Unemployment Rate Hits Double Digits

Non-farm payrolls fell 190,000 in October. This is an improvement from the 219,000 losses in September, but worse than the -170,000 that analysts expected.  Monthly job losses are still very high compared with what we are used to seeing during (or after) recessionary episodes.  This month, the largest losses were registered in manufacturing (-61,000) and construction (-62,000).  In construction, the bulk of the losses came from commercial real estate.  Retail trade (-40,000) and leisure and hospitality (-37,000) also saw sharp job losses.

The unemployment rate also rose more than consensus expected, reaching its highest level in 26 years.  RGE is still expecting the peak in the unemployment rate to be 10.8% in the second half of 2010. This is well above consensus, which sees the rate trending down from 10.1% in Q1 2010 to 9.5% in Q4 2010.

The pace of job losses has been falling sharply since the beginning of the year.  In Q1 2009, total job losses amounted to more than two million.  In Q2, job losses totaled 1.3 million; in Q3, they totaled 700,000.  The pace of improvement is clear.  Total job losses in this recession are at 7.3 million, the highest registered in the post-War period—and they would be much higher (over 10 million) if the cut in hours worked were taken into account.  Compare this with the recession of the 1980s, the most severe in term of cumulative job losses before this one, when 2.5 million jobs were lost.  In the 2001 recession, job losses stopped at 1.6 million. If we take into account the official NBER recession dates, they actually reached 2.7 million.  As we navigate towards a jobless recovery, RGE expects total job losses in this downturn to reach 8 million.