Thursday, May 13, 2010

People With Jobs Are Losing Them at a Slower Rate

By tracking the number of jobless claims, investors can gain a sense of how tight, or how loose, the job market is. If wage inflation threatens, it's a good bet that interest rates will rise, bond and stock prices will fall, and the only investors in a good mood will be the ones who tracked jobless claims and adjusted their portfolios to anticipate these events. Obviously, there is no need for concern of wage inflation for years into the future. Wage deflation and unemployment, are the immediate concerns and so they are on the radar screen. Jobless claims illustrate wage deflation since unemployment benefits are not replacing 100% of employment income.

[Chart] Weekly series fluctuate more dramatically than monthly series even when the series are adjusted for seasonal variation. The 4-week moving average gives a better perspective on the underlying trend
Data Source: Haver Analytics

The Dept of Labor reported on May 7 that in April, the number of unemployed persons was 15.3 million, and the unemployment rate edged up to 9.9 percent. The rate had been 9.7 percent for the first 3 months of this year.

The number of long-term unemployed (those jobless for 27 weeks and over) continued to trend up over the month, reaching 6.7 million. In April, 45.9 percent of unemployed persons had been jobless for 27 weeks or more.

Among the unemployed, the number of re-entrants to the labor force rose by 195,000 over the month.

About 2.4 million persons were marginally attached to the labor force in April, compared with 2.1 million a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted
as unemployed because they had not searched for work in the 4 weeks preceding the survey.