2 Positive Indicators give Hope

According to the Department of Labor, the jobless rate fell from 10.2 to 10 percent for October. This was better than expected, and has raised hopes that full recovery is closer than suspected. Also, the number of underemployed dipped from 17.5 to 17.2 percent. Underemployed workers are those workers who are working part time, but want to work full time. These two numbers combined are significant, in that they are independent from each other and indicate positive action. More impactful is the fact that they were both unexpected by analysts. Two different criterion show positive signs, and cause for optimism. If fourth quarter numbers come out positive again, then long term recovery can be seriously discussed.

False Hope Breeds Caution

Unfortunately, the trumpets of recovery have been sounded before, only to fall silent with the next economic report. A reason why analysts have had trouble pinpointing real recovery rather than positive bumps is the depth of the recession. Even with the drop in unemployment, more than 15 million Americans remain out of work. Furthermore, since the recession began, the unemployment rate has double from 4.9 percent a couple years ago. To gain an understanding of the depth of this recession, history can lend some perspective. Unemployment can be seasonal and cyclical, but long term unemployment of six months or more is a good indication of serious trouble. Today, the number of Americans unemployed for at least 28 weeks is 5.9 million, the highest number since 1948 when this statistic began being tracked. This is pretty much the worst recession since the Great Depression, according to some economists. These numbers show how stagnant the economy has been thus far. This is also a good indicator of the difficulty, even for the best economists and analysts, to accurately interpret indicators, and the number of predictions that proved false.

Still Falling, Just not as Fast

When the unemployment rate drops, many people interpret that as meaning that people have stopped losing their jobs. That is an overly simplistic view of the job market. A drop in unemployment just means that more people were hired than laid off. November saw a cut of only 11,000 jobs instead of 111,000 in October. This seems like a big drop, but only resulted in a .2 percent improvement. Regardless how small the improvement seems, it’s still a great sign for the unemployment rate going down since December of 2007.

Timing is everything

One caution among many is reading too much into employment numbers in the fourth quarter. The number of cut jobs was the lowest since the fourth quarter of 2007. Holiday hiring can skew employment numbers and give an overly positive read on the economic recovery. The problem is that when buying season is over, many of these new hires might be let go. On the upside, the slowdown in the rate at which jobs were cut was also seen in the industrial sector. This is especially positive since that sector has been hardest during the recession.

Cautiously Optimistic

The seriousness of the current recession is hard to grasp for even the most well trained economists. There seem to be some indicators in troubled sectors that show signs of recovery, which is very encouraging. Caution is still the watchword for the day.