2 Positive Indicators give Hope
Data indicates positive trends for now
According to the Department of Labor, the jobless rate fell from 10.2 to 10 percent for October. This was better than expected, and has raised hopes that full recovery is closer than suspected. In addition, the number of underemployed Americans fell as well from 17.5 to 17.2 percent. Underemployed workers are those workers who are working part time, but want to work full time. The combination of these two numbers is significant in that they are independent indicators of positive economic activity. Both were unexpected. Two different criterion show positive signs, and cause for optimism. If fourth quarter numbers come out positive again, then long term recovery can be seriously discussed.
False Hope Breeds Caution
Unfortunately, the trumpets of recovery have been sounded before, only to fall silent with the next economic report. One reason that analysts have had trouble recognizing real recovery from a brief positive blip is the depth of this recent recession. Despite the dip in unemployment, over 15 million people are still out of work. Furthermore, since the recession began, the unemployment rate has double from 4.9 percent two years ago. To understand the depth of this recession, history can give some perspective. Unemployment can be seasonal and cyclical, but long term unemployment of six months or more is a good indication of serious trouble. For now, the number of people unemployed for at least 28 weeks is 5.9 million, the highest number since 1948 when the statistic was first tracked. This is pretty much the worst recession since the Great Depression, according to some economists. These numbers indicate the depth of economic stagnancy pervading the current economy. This also illustrates why it has been so difficult for even the best economists and analysts to accurately interpret economic indicators which has led to proclaiming false starts for real economic recovery.
Still Falling, Just not as Fast
When the unemployment rate drops, many people interpret that as meaning that people have stopped losing their jobs. That is an overly simplistic view of the job market. A drop in unemployment just means that more people were hired than laid off. In November, employers cut 11,000 jobs compared to 111,000 jobs in October. This seems like a big drop, but only resulted in a .2 percent improvement. Regardless of how small the improvement looks, this is still the best showing in the unemployment rate since December of 2007.
Timing is everything
One caution among many is reading too much into employment numbers in the fourth quarter. The number of cut jobs was the lowest since the fourth quarter of 2007. Holiday employment can skew numbers, and give a positive outlook in the short term. The problem is that when buying season is over, many of these new hires might be let go. The upside is that the rate at which jobs were cut in the industrial sector slowed as well. This is especially positive since that sector has been hardest during the recession.
Cautiously Optimistic
The seriousness of the current recession is hard to grasp for even the most well trained economists. There are, it seems, some indicators that troubled sectors are beginning to improve, which is a relief. However, caution is still the guiding force.
