Financial Planning News: Jobless Report

Written By: admin on March 6, 2009 No Comment

Jobless Report Expected to Be Worst Since Jan. ‘84

Exclusive summaries from Fox business News

Reporters will gather at the Department of Labor in what could be a funereal setting: to receive and try to analyze the February jobs report, formally the “Employment Situation,” which could show the worst labor performance for the nation’s economy in 60 years.

The consensus forecast among economists is that payrolls contracted by 648,000, the largest drop in payrolls since October 1949.

The number of payroll jobs has declined nearly 3.6 million since the recession started in December 2007; the consensus forecast would — not counting revisions to earlier data — bring the job losses to 4.2 million, far fewer than the 3.5 million jobs to be made or saved under the President’s stimulus.

The Bureau of Labor Statistics report will really cover two separate surveys: the household survey which develops the unemployment rate by determining the number of people working and the establishment survey which tracks the number of jobs in the economy. The consensus forecast of 7.9% would mean the highest unemployment rate since January 1984, when the unemployment rate hit 8.0%. The last time the unemployment rate was as high as 7.7% was July 1992 — and the last time it was as high as 7.8% was June 1992.

Even if hourly wages increase as expected, a decline in hours worked and/or employment would reduce aggregate income and thus aggregate demand.

Household employment dropped in January to the lowest level since July 2005. The number of people working — household employment — is down nearly 4.2 million since the onset of the recession and the number of people unemployed (as defined: out of work, available for work and seeking work) has increased 4.4 million since the recession started to 11.6 million, the highest level since December 1982.

As the economy shrinks, job cuts have become the norm in all sectors except education, healthcare and government. And while layoffs continue to surge, some companies are turning to wage reductions, hiring freezes and shorter workweeks to control costs. According to the New York Times, layoffs have disproportionately affected male workers. In recessions, it’s common for the percentage of families supported by women to rises, but the trend is gaining momentum this time around. One reason for this is that women tend to comprise a higher percentage of workers in sectors such as health and education, which are more recession-resistant than other sectors.