reports that the October employment report released on Friday was expected to be bad-and it was. The shocker was not so much October's decline as the huge downward revision to September. October's decline in employment of 240,000 was a bit worse than consensus expectations (200,000), but close to Global Insight's projection (250,000). It would have been the biggest decline so far in this recession-except that September's drop was revised dramatically to 284,000 from the originally reported 159,000. August and September job losses were revised up by a combined 179,000. On top of the bad employment news, the unemployment rate jumped to 6.5% from 6.1%, reaching a 14-year high.
This is the 10th consecutive month of job losses, and the cumulative payroll decline now stands at 1.2 million. We expect that decline to reach 3 million before this cycle is done.
September and October each now show job declines in the private sector of roughly 240,000 (excluding Boeing strikers). That is about 100,000 worse than in August, illustrating just how rapidly the economy deteriorated late in the third quarter. The economy was weakening anyway as the quarter went on, and was then struck by the financial crisis, which reached new extremes in September and October. It seems that firms had previously been cutting back employment only gradually, being cautious on hiring but not aggressive on firing. They have now decided that the recession will be deeper than feared, and are acting more aggressively on firing, as they see demand for their products falling rapidly.
This news sets the stage for a new round of employment data later this month.
Next week the state will release it's October jobless data and the week after that the MSA, county and city data will be released.
Basically the Sept. state and local reports were a continuation of the up-down movement common to unadjusted employment data.
On the state level, Tennessee's seasonally adjusted unemployment rate for September 2008 was released last week at 7.2 percent, 0.6 percentage point higher than the August rate of 6.6 percent. The United States unemployment rate for the month of September was 6.1 percent.
Drilling down to the county and city levels, the county with the lowest Sept. unemployment rate was Sullivan County with 5.4%.
The county with the highest unemployment was Greene County with 9.4%.
Among NE Tenn. cities with a population of 20,000 or more Bristol had the lowest jobless rate at 5.8%. Morristown had the highest with 10.7%, followed by Kingsport with a 7.7% unemployment rate. Johnson City's jobless rate increased to 6.1%. CLICK HRE
for the data dum on the area MSA, county and cities jobs/unemployment data.
October's national payroll employment decline was widely spread. Manufacturing payrolls fell 90,000, the biggest decline this year. The only saving grace is that the decline was exaggerated by the disappearance from payrolls of 27,000 Boeing strikers, who will return next month. But the manufacturing decline would have been the biggest this year even without the Boeing strikers. Construction payrolls fell 49,000, the biggest decline since June, with residential-related construction jobs down 27,000 and nonresidential jobs down 17,000. The bottom is still not in sight. The nonresidential side has been holding up better than the residential side until now, but that is changing, and we expect nonresidential construction activity to plummet in 2009.
According to the Global Insight analysts Friday's employment report is just the latest in a series of indicators showing that the economy deteriorated rapidly as the third quarter progressed, and is now contracting very sharply. Immediate prospects are bleak. "We expect to see job declines of more than 200,000 per month for the rest of the fourth quarter and for all of the first quarter. We expect real GDP to decline more than 3% in the fourth quarter. We expect to see the unemployment rate rise above 8% during 2009."
In response, the Fed can and will do some more on the interest-rate front, and we expect it to cut the federal funds rate to 0.5% (from 1.0%) in December. Meanwhile, efforts will intensify for President-elect Obama and the Congressional Democrats to devise more fiscal stimulus to mitigate the extent of the recession. We expect fiscal stimulus of around $200 billion in total, with a combination of spending and tax cuts, to be implemented late this year and early next. CLICK HERE
for the full report.