Unemployment Rate Continues to Climb

November 11, 2008--The latest economic indicators contain little good news. Unemployment is on the rise, shedding thousands of jobs last month. The ISM survey fell again in October, showing decreased industrial output. Last, the housing market remains troubled, with pending home sales declining in September.

 

Employment Situation
The unemployment rate rose to 6.5% in October, a 0.4% jump. Nonfarm payrolls declined by 240 thousand in October, the tenth consecutive decline. Revisions made to the previous two months’ figures showed the economy lost 179 thousand more jobs than originally reported. The economy has lost 1.2 million jobs in 2008. The average workweek remained steady at 33.6 hours, though, a year ago, the average work week was 33.8 hours. Average hourly earnings increased to $18.21 in October, a 0.2% increase over last month. Overall, the job losses are widespread. Losses were recorded in both goods-producing industries and the service industry, while the public sector added jobs. Moreover, weekly unemployment claims are still weak and deteriorating, so the problems in the labor market will be with us for the foreseeable future.

 

ISM Survey
The Institute for Supply Management (ISM) manufacturing survey fell 4.6 points to 38.9 in October and now stands at its lowest point since the early 1980s. October’s decline follows a plummeting of 6.4 points in September, when the ISM was at 43.5. Restricted credit forced business to cut orders, employment, and production. At its current level, the ISM is consistent with an economy in a severe recession. With such a large decline, the Fed may see it as an opening to cut rates if it feels inflation is under control. Looking ahead, manufacturing should remain sluggish as consumers, governments, and businesses pull back on spending in reaction to the financial crisis.

 

Pending Home Sales
The index for pending home sales declined 4.6% in September to 89.2 after surging 7.4% in August. The index is 1.6% higher than its September 2007 level. Given the current turmoil in throughout the economy, buyers and lenders are very cautious. Existing home sales should continue to be flat or in outright decline for the next few months, as the housing adjustment continues coupled with extraordinary circumstances in economy as a whole.