The Two Things That Really Matter

We’ve said it before, and again and again, but it still bears repeating: The real barometers of this recession are employment and housing… and both fronts aren’t looking so hot today.

More than one in every 10 Americans is out of work, the Labor Department reluctantly reported this morning. The official unemployment rate jumped from 9.8% to 10.2% in October. Not only is that the highest in 26 years, but it blew Wall Street clear out of the water — they had priced in a rise to 9.9%.

The Labor Department announced more job losses than expected as well — 190,000 lost jobs, instead of the anticipated 175,000. The number puts to rest a desperate hope from a few months back — that August’s surprisingly small job loss would mark one of the final months of contracting employment.

US Job Losses

That brings the total to 15.7 million officially unemployed Americans, a record 35.6% of which have been out of work for more than six months.

The U6 unemployment number — our preferred gauge, which includes a broader section of the jobless and underemployed — soared half a percentage point in just one month, to a record 17.5%.

“Help-wanted advertising is contracting,” reports John Williams of Shadowstats, with one of his preferred employment metrics. “The Conference Board’s newspaper help-wanted advertising index for September (a leading indicator to October’s employment report) fell to a new record low of 9, from the prior low of 10 that had held for the preceding four months. This new 58-year low is a very negative signal for background employment conditions.

“While some of the weakness in this index of recent years has been due to ads shifting from newspapers to the Internet, near-term relative changes remain significant indicators of pending employment activity. The Conference Board’s online help-wanted advertising also has been in monthly decline, with year-to-year change for new ads down 24.6% in October, versus an annual decline of 25.7% in September. The declining online data are leading indicators of activity to both the October and November employment reports.”

But Llest you think we only tell one side of this story, a glimmer of hope from today’s jobs report: Temp agencies added 34,000 jobs in October, the first statistically notable increase since the recession officially kicked off 22 months ago. Temps have been decent leading indicators for the employment scene in the past, so we’ll keep an eye on ’em.

On to the other real barometer of the recession… the housing front ain’t pretty this morning, specially Fannie Mae’s ugly mug. The lender of last resort (not coincidentally now the largest dealer of U.S. home loans) turned in a $19 billion quarterly loss yesterday. Surprise, surprise… its government receivership has made Fannie WORSE, as it is now forced to accept more bad loans and participate in foreclosure prevention programs — the two major sources of its third-quarter loss.

Moments after its earnings announcement, Fannie asked the government for another $15 billion bailout. It’ll get it, which will bring its taxpayer tab up to $60 billion. The company is eligible for up to $200 billion in bailout bucks before further congressional approval is required. We’ll go way out on a limb here and forecast that Fannie will devour every last cent.

How desperate have Fannie and the federales become? Fannie Mae introduced a nationwide “Deed for Lease” program yesterday, where homeowners about to be foreclosed can transfer ownership to Fannie Mae and then rent the property from a third-party management company.

It’s a sweet deal for homeowners on the verge, but the same “extend and pretend” mentality we highlighted yesterday. Fannie gets to keep more cheap foreclosure properties from hitting the market by playing landlord for a year or so… surely, by then it’ll have all blown over, right?

The Daily Reckoning