Almost a year ago, chief economic strategist Dan Greenhaus of Miller Tabak & Co. told his clients the U.S. economy would recover while jobs would be scarce. It would follow the pattern of the two prior so-called jobless rebounds, with unemployment climbing after the slumps ended.
“I didn’t have enough fingers and toes to count the people I knew getting fired,” he said in a telephone interview from New York. “Companies over-fired during the recession and now demand is not picking up sufficiently to bring back a meaningful amount of people.”
Jobless claims, a gauge of firings, indicate Greenhaus’s July 2009 forecast may be coming true. Applications for jobless benefits have stalled in a range of 440,000 to 490,000 per week this year, a level Bruce Kasman says corresponds with payroll gains of about 100,000 a month, less than the number needed to reduce the unemployment rate.
“We’re in danger of facing a recovery in which job growth is taking place, but not sufficient to offset the amount of job losses in the recession,” Kasman, chief economist at JPMorgan Chase & Co in New York, said in an interview. “It takes more than 100,000 to 150,000 new jobs a month to feel like we’re taking a big step toward unwinding the big losses.”
Data compiled by Bloomberg News show claims within this year’s range coincide with payroll gains of about 17,000 a month on average over the past four decades. Taking into account variables such as the unemployment rate and the stage of the business cycle, Kasman says claims now are “broadly consistent” with about 100,000 jobs a month and a static unemployment rate. (To see the Interactive Insight story, click here.)
The number of applications for jobless benefits last week fell to 455,000 from 457,000 the prior week, according to the median estimate of 46 economists surveyed by Bloomberg News before a Labor Department report today.
Payrolls fell by 125,000 in June, reflecting a drop in the number of temporary federal government employees working on the decennial census, according to the median forecast of economists surveyed before a Labor Department report July 2. Excluding government, companies added 110,000 workers after a 41,000 gain the prior month, and the jobless rate rose to 9.8 percent from 9.7 percent, according to the estimates.
Vince Farrell, chief investment officer at Soleil Securities Corp. in New York, said he’s becoming skeptical his forecast for a big increase in jobs will come true. “I’m not willing to throw in the towel yet, but with claims showing such stickiness, it could be we will be at a low level of 40,000 to 60,000 new jobs for some time.”
The economy needs to create at least 200,000 jobs a month to reduce the unemployment rate, according to Mark Zandi, chief economist with Moody’s Economy.com in West Chester, Pennsylvania. “If that doesn’t happen by the end of the year, then this will go down as another jobless recovery.”