The Bureau of Labor Statistics' July 2 Economic Situation Summary surprised a lot of people: investors, pundits and politicos alike. No green sprouts here.
The facts are clear:
- Total June job losses reversed a recent trend, posting a staggering loss of 467,000 jobs.
- Equally troubling is the decline in weekly hours of work.
This really should not be a surprise. The larger story had already been reported in an excellent article on June 12. Reporting in USAToday, Dennis Cauchon turned in a well researched story that points to the real problem. Unemployment is not the major story.
IT'S THE UNDEREMPLOYMENT, STUPID.
- The hours worked per week in May (then June) represent record lows (data from 1964 forward).
- Weekly earnings for private sector jobs are down since 1Q09.
- Cauchon reports that businesses cut wages by 6.2% in the first quarter. He quotes Laura Sejen of Watson Wyatt as, "this recession is unlike any since the Depression."
No doubt, this recession will be protracted. Before there can a real turnaround, the economy will have to grow enough to reverse both the underemployment, and then the unemployment.
1. High unemployment: 10+% for the next 24 months.
2. Stock market: stagnant with weak earnings for 24 months
3. Commodity prices: soft with the exception of energy.
4. Long term interest rates: rising based on US deficits.