More Bad News - The unemployment Rate is Up to 6.7% and Getting Worse

Continuing bad news on the employment front is suggesting that things will be getting worse for a while. Text in bold is my emphasis. From The Economist:

AMERICA'S recession is likely to be long and deep if the latest employment numbers are anything to go by. America shed more jobs in November than in any month in the past 34 years, according to figures released on Friday December 5th by the Bureau of Labour Statistics. The fall in employment of 533,000 is far worse even the most pessimistic of forecasters had counted on. Not only are the job losses deeper than expected, workers have been shed across almost the whole of the economy. Health care and government employment were the only remaining bright spots. (Actually the "real" forecasters were reporting job losses in the 500,000 range the day before the release.)

Grim statistics abound. Even people in work were toiling for fewer hours than before: the average length of the working week in November was the shortest since records started in 1964. And among the unemployed, the number of people that had not only been laid off but did not expect to be recalled to work rose by 298,000. America now has 4.7m unemployed workers, a number that has ballooned by 2m in just one year. And 608,000 people did not even look for work in the past month because they believed there were no jobs for them to fill, double the number of a year ago.

All told, the number of unemployed in America has risen by 2.7m since December 2007. That is when the present recession actually began by the reckoning of the National Bureau of Economic Research, whose business-cycle dating committee is the official timekeeper of booms and busts in the American economy. During that time, the unemployment rate has risen from 5% to 6.7%.

The chairman of that committee, Robert Hall, an economist at Stanford University, points out a significant difference between earlier recessions and those since 1990. In recessions pre-dating 1990 employment fell more slowly than output. But since 1990, it has fallen as quickly or even quicker than output. The reason is that employers are now more willing to cut their workforce quickly when conditions turn against them.

This is borne out by the economic data for this recession. While employment has declined steadily since December, real GDP as of the third quarter was still above its level at the end of 2007. The November jobs figures, though, point to a deeper recession than many had initially expected. The signs from the wider economy are also grim. Consumer spending will be under pressure for months to come. Home prices have fallen by 16.6% in the year to the end of the third quarter according to the Standard & Poors/Case-Shiller national index, and they still have further to go.

Banks are still deleveraging. Business investment has been badly hit: orders for capital goods sank by 4% in October. The commerical-construction industry is about to feel the effects of the collapse in the market for mortgage-backed securities. The stronger dollar is bad news for American exports, which will in any case be badly hit by the drying up of global demand as economies across the world experience their own economic slowdowns.

Many economists expect the recession to continue until mid-2009 (I believe this is extremely optimistic. I would not be surprised to see this recession go another 12 - 18 months), which would make it a longer period of economic pain than that experienced either in 1973-75 or 1981-82. Moreover, employment is likely to keep falling after the recession is officially at an end. November may well have been the 11th straight month when jobs were shed in America, but it far from being the last.