Tuesday, June 23, 2009

Is unemployment really stabilizing?

We don't think so. We have provided evidence and arguments that we think strongly support our view. Here is another one - the Bureau of Labor Statistics (BOL) released a record mass layoffs figure for the month of May. Second increasing monthly mass layoffs since a temporary decline seen in Feb. and Mar.

The U.S. economy saw 2,933 mass layoffs in May, up from 2,712 in April. Mass layoffs is defined as layoffs of at least 50 workers from a single company.

We may not see record mass layoffs going forward, but the question is - are there enough jobs out there to employ the recently laid-off workers? Not yet, in our opinion. Unemployment could stabilize in Q4, but that's certainly not early enough. We think it will stay at least above 8% through 2010. The new normal rate, which likely would not be seen until 2H10, will be around 8%.

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