Unemployment numbers

This morning the U.S. Labor Department announced the unemployment figures for the month of July.  In short, they don’t look good…initially.  Technically the U.S. economy lost 131,000 jobs last month.  Of those losses 143,000 were U.S. Census jobs.  However, the private sector did add 71,000 jobs in July.

More concerning to me is the trend as June’s unemployment figures were revised tremendously.  The initial report was 125,000 jobs lost.  Yet that figure was revised downward to a new figure of 221,000 jobs lost!  Clearly that is a gigantic revision; most of which came from a massively revised down private sector jobs add of only 31,000.

Analysis: These are not the numbers that anybody in the economy wants to see – except employers, who clearly are not hiring.  My preference is for the “game of chicken” that I have been describing to end.  However, barring outside influence and assistance in the form of government subsidies of the economy, it is tough to see how there is an unexpectedly positive shift out of the economic doldrums.  In short, the economic recovery is going very sloooooowly.  That said, there are several mitigating details I have to highlight.

First, the loss of the Census Bureau jobs has been expected, even by the Census workers themselves.  What that means is that many of them are probably actively looking for work.  So it is not as if these are long-term unemployed who have just given up.  These are folks who are recently employed, likely more confident than other unemployed folks, and likely actively looking.  This confidence makes a big difference in the potency of the job hunt.

Second, the revised private sector job add for June was only 31,000 jobs added by the private sector.  However, July’s initial figure shows a job add by private employers of 71,000.  Assuming that figure is not revised downward by 96,000 jobs as June’s figure were, then that means that private sector employment growth is actually occurring.  My hunch is that 71,000 jobs added figure will be revised downward next month.  But I think it will still be in positive territory.  So the economy is slowly adding jobs.

Third, the U.S. government is mulling creating more job stimulus packages.  If done, the Feds can take massive pressure off of the unemployment situation because it can hire in whole huge swaths of people.  Because it is an election year, you should expect to see some movement here.

Importance grade: 10; the unemployment rate is the lynch pin of the economic recovery.  If these figures don’t start improving there is a real risk that the U.S. economy drops into recession again.  The danger is that giddy rhetoric on the part of politicians, and sunny-sounding legislation won’t cut it the second time around.  No, to shift the mood of the average U.S. citizen will take serious, long-term, potentially painful, but eventually worthwhile CHANGE.  That is, no more doing business as usual.  FYI: I am considering revising my “buy” recommendation for U.S. equities, but not quite, yet.  I will be paying close attention to the data that comes out over the next several weeks.

Jason