Jobs Report to Come Out This Friday Could SurpriseU.S. economic growth is at a stalemate, and the biggest hurdle in its way is the jobs market. While politicians have been arguing the U.S. jobs market is improving, the average “official” unemployment rate for 2012 was above eight percent, and it still hovers around that same level today.
According to the Job Openings and Labor Turnover Summary (JOLTS) by the Bureau of Labor Statistics (BLS), on the last business day of December 2012, there were 3.6 million job openings in the U.S. economy. (Source: Bureau of Labor Statistics, February 12, 2013.) There are 12.2 million people chasing those jobs. Hence, we ended last year with a job-seekers ratio (unemployment workers in the jobs market to job openings) of 3.4:1.
Looking at the historical job-seekers ratio, it shows the agony of the jobs market. In December of 2000, this ratio was 1.1:1. It has improved from its highs of 6.7:1 in July of 2009, but we shouldn’t forget that jobs growth in the retail and service sectors (low-wage jobs) have been making the jobs market look good.
It’s also troubling that 38.1% of all those who are unemployed in the U.S. economy have been without work for 27 weeks or more. (Source: Bureau of Labor Statistics, February 1, 2013.) It’s obvious that there are many troubled spots in the U.S. jobs market. And if they are not fixed soon, they will drive the U.S. economy back into recession.
On top of this, as I have stated in these pages, companies in the key stock indices are expected to see negative earnings growth in the first quarter of 2013. (See “Flash: First Quarter of 2013 Corporate Earnings Growth Turns Negative.”) I believe the January jobs market update, to be issued this Friday, will surprise on the downside. Many U.S. companies have already started to cut their labor forces, and more cuts will be made throughout the year once corporate earnings growth declines further.
It’s a vicious circle. Corporations cut payrolls to boost profits as corporate earnings growth deteriorates. The jobs market gets worse. Then consumer spending, which makes up two-thirds of the U.S. gross domestic product (GDP), contracts. Stock prices go back down; and the next thing you know, we’re back in a recession—not a pleasant thought, but it’s reality.
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