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Economists React: ‘Unmistakable Recession Signals’ in Jobs Data
April 05, 2008
Economists and others weigh in on the weaker-than-expected jobs report, which showed an 80,000 decline in nonfarm payrolls and a jump in the unemployment rate to 5.1%.

Economists and others weigh in on the weaker-than-expected jobs report, which showed an 80,000 decline in nonfarm payrolls and a jump in the unemployment rate to 5.1%.

# Clear and unmistakable recession signals from the labor market. Private payrolls have declined for four consecutive months and the unemployment rate is up 0.7% points from its low of a year ago. This magnitude of a rise in the unemployment rate has never occurred in the post-war period without the economy being in recession. –Bear Stearns

# Another terrible report. Private payrolls now down for four consecutive months. Consumer spending outlook is grim, with wage and salary income growth fading fast and other headwinds as strong as ever… With the consumer’s only source of support for spending coming from job-related income growth, a rapidly weakening labor market is the worst possible news for the economy. Until government checks start flowing sometime in May, the consumer is going to be a major handicap for the economy. Moreover, those rebate checks are only going to provide a temporary respite from the rough process of correcting years of excess in the credit markets and the housing market. This economic slump is going to be a long, grinding one, and a “v-shaped” recovery appears quite unlikely. –Joshua Shapiro, MFR, Inc.

# Overall numbers significantly worse than expected. Headline jobs supported by an 18,000 government rise, but private jobs down 98,000, after -109,000 in Feb and -79,000 in Jan. The Q4 average was +45,000 so the turnaround has been very fast. Manufacturing (-48,000) and construction (-51,000) were worst but also a 35,000 drop in business services; small declines in retail, financial… Trends are awful; unemployment will keep rising, squeezing spending. –Ian Shepherdson, High Frequency Economics

# The recession that has yet to enter its most intense phase will continue to extract a painful price in terms of overall output and the rate of productivity. We do expect that firms will continue to shed workers, but in levels that will not resemble the retrenchment in the labor sector in the aftermath of the dot.com crash, but will be significant enough to create a noticeable reduction in aggregate demand. We expect that the shape of the recession will see one trough reached in the spring of 2008 and the early winter of 2009. –Joseph Brusuelas, IDEAglobal

# The softness in March payroll employment was relatively broad based across industry classifications with the biggest losses coming from sectors such as construction, manufacturing, and temporary help. Within construction, the bulk of the job loss continues to be tied to the fall-off in homebuilding but we are also beginning to see some significant weakness in nonresidential workers.–David Greenlaw, Morgan Stanley

# Interestingly, job losses in the construction sector were nearly evenly split between residential and commercial and suggest that issues in the real estate sector are spreading beyond housing… One noticeable trend is that while the pattern of large job cuts is unchanged, the diffusion index of industries creating jobs continues to fall… The spread of labor market weakness bolsters the case for a recession this year and is among the most troubling aspects of the report. –Drew Matus, Lehman Brothers

# In past recessions the numbers of job losers climbed well over 100k per month. The downbeat labor report confirms why consumer confidence sank so deep this quarter and why the FOMC will have to keep lowering interest rates at their future meetings. –Brian Fabbri, BNP Paribas

# Despite continued protestations from some, the U.S. economy is in recession. GDP likely grew slightly in the first quarter, but employment, production and other more relevant data show declines. Industry data such as the ISM reports suggest that the broader retrenchment is mild by historical standards, and fortunately asynchronous. Exports (agriculture in particular) are booming, while domestic industries retrench. –Steven Wieting, Citigroup

# While the headline number was a little worse than expected, after correcting for the American Axle strike private sector employment declined at an average monthly rate of about 87,333 in the first quarter of 2008, which is not a particularly shocking number. Declines of this order of magnitude are consistent with our view of a shallow recession in the first half of 2008, with the economy overall projected to decline by just under a half a percentage point, on average, in the first two quarters of 2008. –Brian Bethune, Global Insight

# The clear deterioration in job market conditions over the last several months had been more a function of weak hiring on the part of U.S. businesses, as evidenced by the steady climb in continuing jobless claims as initial claims remained fairly low. This has begun to change, however, and the pace of layoffs is accelerating. –Richard F. Moody, Mission Residential

Compiled by Phil Izzo, The Wall Street Journal

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posted by Protrader at 10:09:00 PM | Permalink |


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