A Brighter Jobs Report for a Change

There is today a bright spot to report in the nation's unemployment picture. For the first time since the recession began in 2007, the nation's unemployment rate fell. According to the Bureau of Labor Statistics, the unemployment rate edged down from 10.2 percent in October. to 10.0 percent in November, and nonfarm payroll employment was essentially unchanged.

Nonfarm payroll employment was down 11,000. In the prior 3 months, payroll job losses had averaged 135,000 a month. In November, employment fell in construction, manufacturing, and information, while temporary help services and health care added jobs.

In November, both the number of unemployed persons, at 15.4 million, and the unemployment rate, at 10.0 percent, edged down. At the start of the recession in December 2007, the number of unemployed persons was 7.5 million, and the jobless rate was 4.9 percent.

Among the major worker groups, unemployment rates for adult men (10.5 percent), adult women (7.9 percent), teenagers (26.7 percent), whites (9.3 percent), blacks (15.6 percent), and Hispanics (12.7 percent) showed little change in November. The unemployment rate for Asians was 7.3 percent, not seasonally adjusted.

Among the unemployed, the number of job losers and persons who completed temporary jobs fell by 463,000 in November. The number of long-term unemployed (those jobless for 27 weeks and over) rose by 293,000 to 5.9 million. The percentage of unemployed persons jobless for 27 weeks or more increased by 2.7 percentage points to 38.3 percent.

The civilian labor force participation rate was little changed in November at 65.0 percent. The employment-population ratio was unchanged at 58.5 percent.

The number of people working part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed in November at 9.2 million. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

About 2.3 million persons were marginally attached to the labor force in November, an increase of 376,000 from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

Among the marginally attached, there were 861,000 discouraged workers in November, up from 608,000 a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.5 million persons marginally attached to the labor force had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities.

The labor report came in ahead of analysts' expectations which had forecast a rise to 10.4 percent. Moreover, economists had predicted an inflection point in the late Spring or early Summer and while one month does not a trend make, the November report does break 24 months of an eroding jobs environment.

On the negative side, long-term unemployment remains a persistent thorn. The number of long-term unemployed (those jobless for 27 weeks and over) rose by 293,000 to 5.9 million. The percentage of unemployed persons jobless for 27 weeks or more increased by 2.7 percentage points to 38.3 percent setting another record.

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The Structural Unemployment Problem

Former Labor Secretary Robert Reich offers some worrisome thoughts on his way to the jobs summit.

[H]ere's the real worry. The basic assumption that jobs will eventually return when the economy recovers is probably wrong. Some jobs will come back, of course. But the reality that no one wants to talk about is a structural change in the economy that's been going on for years but which the Great Recession has dramatically accelerated.

Under the pressure of this awful recession, many companies have found ways to cut their payrolls for good. They've discovered that new software and computer technologies have made workers in Asia and Latin America just about as productive as Americans, and that the Internet allows far more work to be efficiently outsourced abroad.

This means many Americans won't be rehired unless they're willing to settle for much lower wages and benefits. Today's official unemployment numbers hide the extent to which Americans are already on this path. Among those with jobs, a large and growing number have had to accept lower pay as a condition for keeping them. Or they've lost higher-paying jobs and are now in a new ones that pays less.

Yet reducing unemployment by cutting wages merely exchanges one problem for another. We'll get jobs back but have more people working for pay they consider inadequate, more working families at or near poverty, and widening inequality. The nation will also have a harder time restarting the economy because so many more Americans lack the money they need to buy all the goods and services the economy can produce.

So let's be clear: The goal isn't just more jobs. It's more jobs with good wages. Which means the fix isn't just temporary measures to accelerate a jobs recovery, but permanent new investments in the productivity of Americans.

Let's take the situation in Tennessee where the unemployment rate is now 10.5 percent for example. In the Volunteer state, manufacturing jobs have fallen 12.6 percent in the past two years. According to Tennessee Manufacturing Register, 56,647 jobs were lost due to closures and layoffs. A month ago, Manufacture's News Inc. (MNI), a Chicago based manufacturer's directory publisher, released a report on the industrial jobs in Tennessee. They found that a total of 15,110 jobs were lost between September 2007 and September 2008 but that serious bleed came over the past year. 41,537 jobs in Tennessee's manufacturing sector were lost between September 2008 and September 2009.

But while the loss has been accelerated over the past year, the loss has been actually been on-going for quite some time. According to the MNI report, Tennessee's 7,711 manufacturers now employ 403,030 workers compared to 547,494 workers in 2001. That represents a 26.4 percent decline amounting to 144,464 job losses.

Among the hardest sectors over the past 24 months are the furniture and fixtures sector down 20.8 percent; the transportation equipment sector down 20.6 percent; the rubber and plastics sector down 20.4 percent; the lumber and wood saw sector down 19.5 percent; the textile and apparel sector down 16.1 percent; the industrial machinery and equipment manufacturing sector down 13.6 percent; the fabricated material manufacturing sector down 12.6 percent; and the stone, clay and glass manufacturing sector down 9.6 percent.

Some of these sectors are just never going to regain their footing even when the economy recovers. Our textile and apparel has been in a slow and steady decline for 30 years.

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US Commercial Mortgage Default Rate at a 16 Year High

According to Real Estate Econometrics,  a property research firm, the total balance of delinquent and defaulted commercial mortgages in the July to September time frame in the US has jumped by 14 percent to $50.3 billion. During the 3Q09, the commercial default rate rose from 2.88 percent to 3.4 percent, the highest level since 1993 when the default rate was 4.1 percent.

The national default rate for commercial real estate mortgages has now risen 63 basis points from 2.25 percent since the beginning of 2009 and doubled over the past year. Moreover the 52 basis point increase in the third quarter is the largest one-quarter increase since quarterly data became available in 2003. The rising default rate is more bad news for already stressed banks, which hold more than 80 percent of the maturities due on commercial real estate debt over the next two years.

"The dramatic decline in real economic activity and labour markets since last September has undercut property fundamentals, increasing the number of recently originated loans that are at risk for delinquency and default because of cash flows falling short of principal and interest obligations," said Sam Chandan, chief economist at Real Estate Econometrics.

Real Estate Econometrics sees the default rate for commercial real estate mortgages held by depository institutions hitting 4.0 percent in the fourth quarter of 2009, about 5.2 percent by the end of 2010, and peaking at 5.3 percent in 2011.

Last week, the FDIC published its quarterly banking profile.  While the  FDIC noted that indicators of asset quality continued to deteriorate during the third quarter, the pace of deterioration slowed for the second consecutive quarter. That's the good news. The bad new is this:

The number of institutions on the FDIC's "Problem List" rose to its highest level in 16 years. At the end of September, there were 552 insured institutions on the "Problem List," up from 416 on June 30. This is the largest number of "problem" institutions since December 31, 1993, when there were 575 institutions on the list. Total assets of "problem" institutions increased during the quarter from $299.8 billion to $345.9 billion, the highest level since the end of 1993, when they totaled $346.2 billion. Fifty institutions failed during the third quarter, bringing the total number of failures in the first nine months of 2009 to 95.

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Fault Lines - The Color of the Recession

Al Jazeera's Fault Lines presenter Avi Lewis hosts a debate about race & the US recession with Jesse Jackson of the Rainbow Coalition; Rosa Clemente, an activist and former Green Party Vice Presidential candidate; Linda Chávez, director of the conservative Center for Equal Opportunity and the Reverend Greylan Hagler of the United Church of Christ.

If we are living through a Great Recession, for people of color it is a quiet depression. Among whites with a college degree, the unemployment rate as of September 2009 is 4.0 percent. For blacks with a college degree, the unemployment rate is nearly twice as high at 7.2 percent. Hispanics fare slightly better. The unemployment rate for Hispanics with a college degree 5.6 percent.

The unemployment rate is higher among men than among women. For black men, 25 and over and at all education levels, the unemployment rate is 16.1 percent while for black women, 25 and over and at all education levels, the unemployment rate is 11.0 percent. For black men and women ages 15 to 24 without a high school degree the unemployment rate is a staggering 42.7 percent. The New York Times has an interactive feature where you can find the unemployment rate by various demographics.

Below the fold is a breakout of unemployment data (U3) by demographic groups.

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Las Vegas Housing Market: Not as Bad as Latvia's

A report out this week finds that the proportion of US homeowners who owe more on their mortgages than the properties are worth has swelled to about 23 percent nationwide. Some 10.7 million households households had negative equity in their homes as of the end of the third quarter of 2009. Homeowners in Nevada, Arizona, Florida and California are more likely to be deeply under water, according to the analysis. In Nevada, for example, nearly 30 percent of borrowers owe 50 percent or more on their mortgage than their home is worth. In Las Vegas, a home purchased for $530,000 in 2004 is now worth just $300,000.

To put this in context, consider this: the Global Property Guide's quarterly house price report was published today offering some sobering statistics on global real-estate prices in the third quarter. Worse off is Latvia, where homes prices have collapsed this year alone by 59.7 percent. Other hard hit areas include the United Arab Emirates (down -48.1% YTD), Bulgaria (-28.7%), Iceland (-21.2%), Russia (-19.5%) and Slovakia (-15.3%).

Here are the steepest declines in the US Housing Market y/y for 2009:












Metro AreaPct Decline
Cape Coral-Fort Myers, FL-40.0%
Las Vegas-Paradise, NV-34.5%
Rvierside-San Bernardino, CA-26.0%
Orlando, FL-26.0%
Melbourne-Titusville, FL-24.6%
Miami-Ft. Lauderdale, FL-24.6%
Reno-Sparks, NV-24.1%
Ocala, FL-24.0%
Phoenix-Scottsdale, AZ-22.9%
Sarasota-Brandenton, FL-22.0%
Source: National Association of Realtors

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