Will Unemployment Hit 15%

Will Unemployment Hit 15%

The hammer fell Friday morning when the Labor Department’s Non-Farm Payroll was released showing another 263,000 jobs trimmed from the U.S. workforce. Unemployment is now stated at 9.8%. Most analysts feel the rate is significantly understated and does not accurately reflect the employment toll on small business.


Originally, hopes were high for improved employment in September but the bad news began with a Goldman Sachs release on Thursday and carried through this morning. The September losses were the lowest since August 2008 but raised unemployment to the highest level since 1983.

Since the recession began in December 2007, 7.2 million Americans have been added to the unemployment rolls. Total non-farm unemployment now exceeds 15.1 million persons. The reality is that the real unemployment rate is higher. The non-farm payroll report does not reflect workers whose benefits have expired or who have given up searching for employment and reflects only a cursory view of small business.

The number of long-term unemployed workers, those workers who have been unemployed for 27 weeks or more, increased by 450,000 workers in September. In September, 10.3% of adult males were unemployed.

Another telling tale of the crisis is the number involuntary part-time workers, those workers whose hours or pay has been trimmed, remained at 9.2 million Americans. Approximately 2.2 million workers were deemed marginally attached to the labor force.

While unemployment is generally regarded as a lagging indicator, the high rate is undermining the recovery. As the fourth quarter begins, the trajectory of the recovery is troublesome. An unemployed American consumer shakes the roots of every market.

By Employment Sector

The September Non-Farm Payroll report contained the following job losses by sector:

* Construction -64,000

* Manufacturing -51,000

* Durable Goods -43,000

* Non-durable goods - 8,000

* Services -147,000

* Retail -38,500

* Transportation -15,400

* Financial -10,000

* Education -16,900

* Government -53,000

* Health Services +20,500

To further impact the unemployment report, August and July figures were reduced revised to reflect larger losses.

On Friday, August manufacturing numbers were reported and orders were down 0.8%. It was the first loss in four months.

Analysts originally predicted that job losses would settle in the –175,000 range. Government job losses of 53,000 are a reflection of the state and local government layoffs. The federal government has continued to add jobs.
No Bottom in Sight

Many international analysts see the American employment situation as even worse than reported. In a report relased later Friday morning, Nicu Harajchi of N1 Asset management told CNBC News that their view is dim. Harajchi suggested that unemployment would increase significantly in 2010 settling in the 12-15% range.

“We expect the unemployment numbers to increase… we believe that going into the fourth quarter we are going to see increased unemployment and I also think that in 2010 we are going to see between 12 and 15% in the U.S.”

“We are very pessimistic on 2010 because this is when we think that all that liquidity that has been pushed into the markets by the central banks and by the Fed, at some point they’re going to come and they’re going to need some of that money back. We think 2010 is going to be a much worse year.”

Harajchi points to the ever-increasing number of bank failures as indicative of the true depth of the recession. As unemployment continues to rise, the shape of the recession begins to look more and more like that imposing W that investors and government officials fear.