Unemployment Climbs, Again

Nonfarm payroll employment continued to decline sharply in March (-663,000), and the unemployment rate rose from 8.1 to 8.5 percent, the Bureau of Labor Statistics reported today. Since the recession began in December 2007, 5.1 million jobs have been lost, with almost two-thirds (3.3 million) of the decrease occurring in the last 5 months.

In March, the number of unemployed persons increased by 694,000 to 13.2 million, and the unemployment rate rose to 8.5 percent. Over the past 12 months, the number of unemployed persons has grown by about 5.3 million, and the unemployment rate has risen by 3.4 percentage points. Half of the increase in both the number of unemployed and the unemployment rate occurred in the last 4 months.

On Wednesday, we reported that the ADP measure of private sector unemployment climbed, so it shouldn't come as a big surprise that BLS is also showing climbing unemployment. That said, there are a number of reasons to believe that the March numbers may be the bottom in the climb in the new number of unemployed (or at least within a month or two of the bottom).

Remember, for the first half of March, Obama was into his fear mongering act, which would have certainly scared many more business owners at the margin into making cuts they were only contemplating. Second, and very important, unemployment tends to be somewhat of a lagging/coincident indicator. You generally see the first signs of a recovering economy in the stock market and factory orders--and those are coming along quite nicely.

As for the specifics on the newly unemployed, a large portion continue to come out of the heavily hit capital goods sector.

Manufacturing employment fell by 161,000 in March, with widespread job losses occurring among the component industries. Factory employment has declined by 1.0 million over the past 6 months. In March, the largest decreases occurred in fabricated metal products (-28,000), machinery (-27,000), and transportation equipment (-26,000).

The construction industry lost 126,000 jobs in March, with declines occurring throughout the industry. Employment in construction has fallen by 1.3 million since peaking in January 2007; nearly half of that decline occurred over the last 5 months. In March, employment fell in specialty trade contractors (-83,000) and construction of buildings (-33,000). These declines were split about evenly between the residential and nonresidential portions of these industries. Heavy and civil engineering construction also lost 10,000 jobs. Employment in mining and logging declined by 18,000 in March.

Employment in financial activities continued to decline in March (-43,000). The number of jobs in this industry has dropped by 495,000 since an employment peak in December 2006. More than half of this loss occurred in the past 7 months. In March, job losses occurred in credit intermediation (-15,000); real estate (-12,000); and securities, commodity contracts, and investments (-7,000).

What BLS classifies as retail trade employment, but which we would classify mostly as capital goods unemployment, fell by 48,000 over the month. In March, employment decreased in building material and garden supply stores (-13,000), automobile dealerships (-12,000), and electronics and appliance stores (-10,000). Employment in wholesale trade fell by 31,000 in March, with nearly all of the decline occurring in what the BLS classifies as durable goods, i.e. capital goods.

With the unemployment coming out of these sectors, the reason to think we are at the bottom in the newly laid off is that we are starting to see some uptick in construction which will slow layoffs there, and the stock market appears strong, which is likely to slow unemployment in the securities industry.

In summary, there is nothing in the current numbers that suggests we aren't in the early stages of recovery. Of course, if Obama was still a fear monger he would be jumping all over this number, there are other fear mongers out there, but Obama appears to have departed that camp.