While the unemployment rate jumped to 9.4 percent, which is the highest rate since 1983, there was actually a tremendous amount of good news in the May 2009 jobs numbers. The economy shed 345,000 jobs—the lowest amount of job loss in eight months, according to the Department of Labor.
It seems clear, looking at past trends, that the U.S. economy has turned the corner. These numbers are consistent with information that we have been getting over the last month. Over the last five most recent recessions, you can see that as soon as unemployment insurance claims start to turn around, the economy rebounds quickly. We know that those claims hit their peak and then move down fairly steadily from there. That’s why I feel confident that we have turned that corner and things are going to start to get better relatively quickly.
Especially given the focus of the Obama administration on using the stimulus to create or save jobs, it is important to put the economic churn into perspective. There is job destruction and job creation all of the time. Although things looked much better in the last month, there were still over 700,000 jobs destroyed—but they were offset by close to 400,000 jobs that were created. And those new jobs were created in a lot of different sectors. The government’s stimulus package was very helpful in pushing that process along. It helped by creating some of those new jobs, but of course there are new jobs created all of the time, it is too early to how much the stimulus is responsible for those gains.
The economy still suffers from some lack of clarity which is also a factor in the labor market. For example, the uncertainty in the auto industry is causing the private sector to adopt somewhat of a wait-and-see mode. It is definitely true that, especially in places where there are some of the auto plants or dealers that are slated for closure, there will definitely be more job losses. That local impact can be offset once there is clarity about which of those factories and dealerships are going to be closed and which of them will survive. Once a decision is made, business that support those factories and dealerships—like surrounding restaurants, housing, part suppliers—will start to invest and bring people back into work.
We are also working through the uncertainty in the financial system and it’s possible the housing market—which has been at the heart of our recession—has finally hit bottom. I think we will see some additional economic shrinkage but much less than what we have experienced. I would think next quarter is going to be considerably better than last, and I think the recession will end early next year, barring anything unforeseen.