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Thursday, January 10, 2008

Employment And Retail

First employment. The weekly unemployment claims report is out. At first blush it looks good, because the SA claims have dropped to 322,000. However continuing claims (which run a week behind) are up to SA 2,702,000 and NSA 3,290,775. The YoY change for both is in the 280,000 - 290,000 range, which is a YoY increase of over 10%. That's in the danger zone. When initial claims increase at a significantly lower rate than the increase in continuing claims, the employment situation is degenerating.

The SA and NSA insured unemployment rates are now both .2% over last year's numbers. The four-week moving average this week is 341,000, which is not statistically different than the previous. The revisions each week are now upwards, which is a further indicator of a negative trend.

These are the states with increases of more than 1,000 in initial claims for the week ending 12/29:
ID +1,071
No comment.
IN +1,112
Layoffs in the automobile, transportation, construction, service, and manufacturing industries.
VT +1,407
Layoffs in the manufacturing industry.
NY +1,461
Layoffs in the construction, service, and transportation industries.
NC +1,711
Layoffs in the construction, lumber/wood, rubber/plastics, transportation equipment, textile, electrical equipment, and electronic equipment industries.
CT +2,352
Layoffs in the construction and service industries.
MD +2,503
No comment
OR +2,573
No comment.
MA +3,464
No comment.
OH +5,611
Layoffs in the manufacturing industry.
WA +5,840
Layoffs in the construction and manufacturing industries, and agriculture.
NJ +6,859
Layoffs in the transportation, warehousing, service, public administration, and manufacturing industries.
IA +8,339
No comment.
PA +14,632
Layoffs in the industrial machinery, electrical equipment, transportation, and food industries.
WI +18,047
Layoffs in the construction, trade, service, transportation, warehousing, and manufacturing industries.
MI +18,482
Layoffs in the automobile industry.

Wisconsin has been having a bad time of it lately, but PA is the one I am watching the most closely. For jobs, at least, the economy is weakening across a broad spectrum of states and areas. It's kind of like grass fungus. First you get a few brown spots, and the next thing you know, the brown has taken over half your lawn.

I'll give it another few weeks, but it's getting harder and harder to believe that manufacturing employment overall will be a positive until late in 2008, which is unfortunate.

Retail sales are low enough that many of the big chains will continue to cut back on their expansion plans. Starbucks, for example, announced that it is going to slow expansion and close some stores this week. Casual dining showed weakness all last year and most of the chains are continuing that trend. So we can project with reasonable certainty that overall retail employment will be slow to negative. This will hurt commercial real estate prices, slow building, and it will also negatively impact employment.

Rising delinquencies in many auto and CC portfolios are not consistent with the belief that consumer spending will continue at the current pace. Early trends in Treasury receipts show a YoY slowing in growth of withheld income and employment taxes, and an outright drop in federal unemployment tax receipts. This is highly consistent with the other data.

So I would say that the data shows with considerable robustness that we have entered into the situation of weaknesses reinforcing weaknesses that characterizes a recession. How deep and prolonged that recession may be really depends on factors that don't originate in our economy. I'll try to collect my thoughts and organize some data and post tomorrow on that.

I wonder how long it will take before they admit to weakness in the Seattle real estate market. The SW Washington market has been down for awhile now.
ed in texas

Well MOM, you dump that many mortgage brokers, stock salesmen, and realtors on the street at once and the employment numbers HAVE to trend down. Productivity goes up at the same time...(snark).
And all the Hal Lindsays of "GOLD! GOLD! GOLD! GOLD! GOLD!" are coming out of the woodwork. Just saw one on an LJ Friends list this morning.

"Enjoy the decline of America, and BUY GOLD!"
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