Jobs

Tomorrow is another big day in measuring our economy. That's when we will find out what the new unemployment rate will be through the end of March. The current unemployment rate, based on February's readings, is at a level of 8.1% of the workforce.

My guess is that we will actually see an unemployment rate of 8.7% or, even, 8.8%. This is somewhat higher than the current consensus estimate of 8.5%. I'm thinking higher because, for the last four weeks, we have seen first-time, weekly unemployment claims in a range of 660,000 to 670,000. That's a lot of jobs being lost. This morning, the loss number came in at 669,000 new claims for the week (See Full Story).

In good times, the first-time unemployment claims would have been somewhat south of 300,000 in an average month. But, now, in this recession, we are consistently clocking in at a rate that is at least 360,000 claims "higher" than in a non-recessionary period. Therefore, on a four week basis, that means that we are losing more than 1.4 million jobs above what would be normal. Granted, some of these claimants will find new jobs and come off the unemployment rolls and "net" job losses for the month will be substantially lower than 1.4 million. For that very reason, both January and February saw net job losses of 650,000 for each month; despite losing in excess of 1.2 million jobs in both those months. If we simply continued losses at the 650,000 rate and all things remained equal then, for sure, we would probably see an 8.5% for tomorrow's unemployment rate.

But, having high unemployment rates for so many continuous months has an overall debilitating effect on the job market. That's because jobs losses start feeding on each other. As the unemployment rate increases and more and more people are without work, less and less money flows into our economy. As a consequence, more jobs are lost because the overall business activity of the country is slowed. So it goes on and on until the level of business activity is able to find some kind of bottom. That's why I think that that there will be less people able to get reemployed than had been seen in previous months. For that reason I'm betting tomorrow's unemployment report will exceed 700,000 jobs being lost with an overall jobless rate of at least 8.7%.

Now, it should also be pointed out that any number below (better than) 8.5 percent could be considered a strong jobs number. That could mean that we are near a turn around because the high weekly jobs claims aren't being equated into a substantially higher unemployment scenario. If that did happen, the stock market would clearly continue its upward trend and the optimism of the last four weeks.