Wall Street Greek: 10.2% Unemployment Rate!

A Frightful October Employment Report

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In a little less than two years unemployment has nearly doubled, reaching a point we have not seen in 26 years. The recession began in December 2007, and since then, the number of unemployed persons in America has increased by 8.2 million, to a frightful 15.7 million. What's worse, is that the reported unemployment rate does not include folks working part-time due to reduced hours or layoffs from their full-time jobs. It also excludes people who have lost hope, but are employable under normal conditions.

10.2% Unemployment Rate!

The Department of Labor reported the unemployment rate rose to 10.2% in October 2009, up from 9.8% in September. The jump up in the jobless count also significantly surpassed economists' consensus expectations for a 9.9% reading, based on Bloomberg's survey.

The pace of labor force job shedding has at least eased though, with nonfarm payrolls dropping 190K jobs this time around, versus a revised -154K in September (from -201K) and -219K in August (revised from -263K). Still, the job-loss reading stayed consistent with the take on the rate of unemployment, as it was also worse than economists' consensus expectations for a -175K nonfarm payroll decline.

The bad news did not end there either, as the devil is always found in the details of the Employment Situation Report. It is a bad sign to find people out of work for an extended period of time, and a whopping 35.6% of unemployed persons were out of work for 27 weeks or more as of October. Those considered "marginally attached" to the labor force amounted to 2.4 million, up 736K from the prior year. Marginally attached workers are not counted in the unemployment figures, because they have not searched for a job in the last four weeks. Discouraged workers, which represent the segment of the marginally attached who believe there are simply no jobs for them, was also up nearly double from the year ago period. Another segment that we like to note here, despite getting little attention elsewhere until recently, is the 9.3 million working folks who are working part-time jobs, but would rather be fully employed.

"If we include the underemployed and the marginally attached workforce in the unemployment count, effective underemployment-unemployment measures 17.8%"

If we include the marginally attached (2.4 million) and involuntary part-timers (9.3 million) in the unemployment count (15.7 million + 9.3 mln. + 2.4 mln.), then 27.4 million folks are effectively unemployed or underemployed in America. If we divide those folks by the labor force count (27.4 million/ 153.975 million), then the effective rate of underemployment-to-unemployment is 17.8%. That's simply stunning!

The government's monthly data showed job losses continued to mount in Construction (-62K) and Manufacturing (-61K). The Retail Trade is not doing well either, as that telling segment shed 40K jobs in October and 44K in September. Health care still seems like the direction to steer your children, as the segment added 29K jobs in October and 597K since the start of the recession.

The President expressed regret at the sobering unemployment rate. The Administration instead focused on the improved rate of deterioration in the monthly job loss count, and it reminded folks of recent economic growth. In response to the bad news though, the government issued its fourth extension of unemployment benefits to a record 99 weeks. States where unemployment measures above 8.5% will get an extra 6 weeks of benefits. Also, Congress moved to extend the $8,000 First-Time Homebuyer Tax Credit for seven more months, which will take it through July of 2010. The government also expanded the credit to include a $6,500 break for purchasers of homes who have lived in their current residence for more than five years. Finally, businesses that are operating in the red will be allowed to again take a refund from taxes paid on profits of the last five years.

With unemployment still rising, one must consider if a jobless recovery is truly possible. We do not think so here, or at least it will not be a robust or consistent one. Consumer spending this holiday shopping season will be targeted to discount stores, and other operators like Macy's (NYSE: M) and J.C. Penney (NYSE: JCP) have also lowered their average cost and price of product for sale in order to compete with the Wal-Marts (NYSE: WMT) and Targets (NYSE: TGT) of the world. A good number of Americans might skip holiday gift giving this year, and instead focus on what they still have, which we hope continues to include health, love and happiness. Perhaps the best gift to give an unemployed person this December is an introduction to a future employer or an executive search/employment firm contact at Robert Half International (NYSE: RHI), Korn Ferry (NYSE: KFY), Manpower (NYSE: MAN) or Monster Worldwide (NYSE: MWW). A prayer is always welcomed as well...