Don't Rule Out the Double Dip
Initial claims for unemployment insurance fell to their lowest level in over a year last week. Likely a precursor to their jobs report tomorrow, the Labor Department proudly announced that “just” 457,000 Americans filed for their first week of unemployment benefits. That’s the fifth straight week of decline, the lowest number since September 2008 and the second consecutive report under half a million… a sort of “Dow 10,000” headline grabber. It would appear that the jobs scene has suffered its worst:
But what how does this same employment environment look through the lens of history? A bit more interesting…
We celebrate the jobs scene stepping back from the brink, but there must be some merit in noting that our current state of jobless claims “recovery” is at the same level of the worst — the absolute peak — of the last two recessions. We’re also not even halfway back to the pre-crisis norm, nor are jobless claims below a level that would disqualify a double dip, as illustrated in the early ’80s.
“New claims for unemployment insurance have been declining on average in the last several months,” adds John Williams of Shadow Stats fame, “but such does not mean a turnaround in the employment picture. With the extreme economic contraction — unprecedented as to duration and depth in the post-World War II era — what is being seen here most likely is the beginning of some bottom-bouncing, where heavy layoffs may have run their courses to a certain extent, at least temporarily, but where the pace of hiring is declining, too.
“Weakness in help-wanted advertising confirms the downside pressures in hiring… the Conference Board’s newspaper index for October held at September’s historic low. The online help-wanted advertising measure showed that new online ads in November were down 24.0% year to year, compared with a 24.6% annual decline October.”
Speaking of a double dip, this is interesting:
The ISM reported today that its index of the U.S. service sector (read: almost 90% of the whole American economy) returned to a state of contraction. The index fell from 50.6 to 48.7 in October, crossing that famous dividing line between expansion and contraction. As you can see, the U.S. service sector returned to growth earlier this summer, a popular indicator that the recession was over. So now… has the second leg begun?