Ray Of Hope After Horrible Jobs Number?


It’s hard not to audibly gasp when you look at the latest jobs report. The headline numbers are staggering -- unemployment hit a 25-year high of 8.1 percent last month with employers slashing 651,000 jobs.

And if you want more superlatives we’ve got them. Since the start of the recession in December 2007, the economy has shed 4.4 million jobs, with more than half purged in the last four months alone.

But those are the headlines. It’s always a good idea to peel back the layers and look a little deeper. Here is a breakdown of where the job losses were as well as which sectors were adding jobs. Worst hit was manufacturing and professional services. And as they have in the past, health services and government added the most jobs.

Total change in non-farm payroll = - 651,000

  • Private Sector = - 660,000
    • Natural Resources & Mining = - 4,000
    • Construction = - 104,000
    • Manufacturing = - 168,000
      • Durable goods = - 132,000
      • Non-durable goods = - 36,000
    • Services = - 375,000
      • Wholesale Trade = - 37,000
      • Retail Trade = - 39,500
      • Transportation = - 48,900
      • Utilities = + 1,100
      • Information & Media = - 15,000
      • Financial Svcs & Real Estate = - 44,000
      • Professional & Business Svcs = - 180,000
      • Education = - 4,200
      • Health Svcs = + 30,400
      • Leisure = - 33,000
  • Government = +9,000

Total change in non-farm payroll = - 651,000

First The Bad News

Companies struggling with falling revenues and tight profit margins are slashing jobs in huge numbers, a step that is forcing households to further scale back spending, creating a vicious cycle for the bleeding economy.

"The situation is getting worse, not better," says Mohamed El-Erian, the chief executive of bond giant Pimco. "What today's number tells you is ... even the profitable firms are shedding labor in order to position themselves for a more difficult outcome."

"I suspect we'll continue to lose jobs for months to come," adds John Silvia, Wachovia Chief Economist. "All we can hope is that the pace will slow down."

Now The Ray Of Hope

There may, however, be a bright spot, however. Silvia tells Fast Money “jobless claims probably won’t get any worse. 600,000 is a threshold number.”

In fact, people are starting to come to terms with this economic reality of sharp job losses. And even if things spiral downward from here and we reach 10% unemployment, by and large, most people won’t lose their jobs. (We know, that’s hardly solace to the millions out of work – but it’s an important part of this equation.)

In other words, even if the economy sheds jobs at an alarming rate, some economists say the worst may be over and that should spark consumer spending.

“We had a shock to the system,” says Chris Rupkey, chief financial economist at the Bank of Tokyo-Mitsubishi. “As we get past the shock, they will start spending. There's pent up demand.”

Rupkey is hardly among the minority in thinking that way, and though that assessment may sound somewhat tentative, it has some historical precedence.

Consumer spending bounced back after other major national shocks, such as the terror attacks of 2001 and the stock market crash of 1987.

Consumers led the way before and maybe we’re seeing the very beginning of that happening again. Go ahead, call us a Pollyanna, but this could be the beginning of the end.

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