Arpitha Bykere
reprinted with permission from RGE Monitor
Today’s employment report showing large job losses and a spike in the unemployment rate indicate things are only getting worse for the U.S. consumer, especially when he is dealing with high cost of living, mortgage and credit card debt and tighter credit conditions. Given the jobless recovery and slow wage growth since the last recession, households used their homes and credit borrowing to finance consumption and drive the economy. But the housing and financial sectors took a hit and now with even the labor market flashing a ‘no-entry/only exit signal’ at them, it seems like a perfect storm for the U.S. households.
What are the Indicators Showing?
Several leading labor market indicators are now showing trends that in the past have been observed only when the economy was in the initial stages of a recession. After total job losses of 412,000 in H1 2008, July witnessed job loss of 51,000 in July. Payrolls often called lagging indicators ‘usually’ start softening as the economy slows and turn negative when the economy enters a recession, moving back to the positive territory only after the recession ends and recovering slowly thereafter. Job creation started slowing since mid-2007 but has turned negative since Jan 2008. Job growth has in fact turned negative on a 3-month moving-average and quarterly basis since Feb 2008. Job growth on a 12-month moving-average and yearly basis has also slowed starting Jan 2008.
