ABA Banking Journal - May 2009 - (Page 36)

briefing The Economy ROB STRAND Senior Economist, Economic Policy & Research ABA Government Relations Employment has not bottomed THE U.S. UNEMPLOYMENT rate rose to 8.5% in March. By comparison, the rate topped out at 7.8% following the 1990-1991 recession and at 6.3% after the 2001 recession. Considering that the unemployment peak normally comes some time after a recession ends—15 months after 1990-1991 and 19 months after 2001—and because there is no evidence yet that the current downturn is nearing an end, a disturbingly higher unemployment rate appears inevitable. Payroll employment has now declined for 11 straight months. Job losses began to accelerate last summer, to an average pace of over 800,000 monthly since December. A total of 5.8 million jobs have been eliminated since the current downturn began in late 2007—3.3 million this year. Again in comparison, 1.8 million jobs were lost in the 1990-1991 recession and 1.4 million in the 2001 recession. Weekly unemployment claims have also trended upward since the beginning of 2009, to around 675,000 per week. This level also exceeds that of the past two recessions. Service industries (aside from mortgage finance) had shown modest employment growth through most of the past year. Since October, however, service sector employment has also deteriorated. In banking, employment is down 3.2% over the last year and a half. The only sectors that have continued to add jobs are health and education and government, but the latter is weakening dramatically with growing state and local government budget shortfalls. Several indicators confirm continuing job losses. Retail sales, following a lackluster holiday shopping season and weak winter, have continued to slip this year—at a 1.8% goods orders are down over 20% in the last six months. Moreover, many firms are holding back on hiring due to uncertainties over how they will be affected by changes in regulations and taxes. The one glimmer of hope is that, unlike in the 2001 recession, there is Job gains and unemployment 2,000 1,600 Unemployment rate 1,200 800 400 (400) (800) (1,200) 1989 6% 4% 2% 0% -2% -4% -6% 1993 1997 2001 2005 2009 10% 8% Job gains Job losses Source: U.S. Bureau of Labor Statistics annual pace through the first quarter. Factory utilization, which had been holding up, plummeted in recent months, to 69.3% in March, the lowest level ever recorded, indicating likely further future layoffs and plant shutdowns. In particular, continuing slack in the auto industry suggests further job losses there up and down the supply chain. Durable not an excessive level of business inventories. Once growth does resume, the lag between output and employment growth may be shorter than before as firms will have to ramp up production to meet demand. Until then, however, it seems all but certain that the employment situation will continue to deteriorate. BJ 36 MAY 2009/ABA BANKING JOURNAL www.ababj.com/subscribe.html http://www.ababj.com/subscribe.html

Table of Contents for the Digital Edition of ABA Banking Journal - May 2009

ABA Banking Journal - May 2009
Contents
Editor's Column
Special Briefing on the Mortgage Cleanup
Tackling the "End of the Beginning" of Mortgage Crisis
ABA Resources
ABA Chairman's Position
Banks Wade into Social Media
Pass the Aspirin
Part 1: Banks and Thrifts Over $3 Billion in Assets
Top 25 Ranked, With Key Performance Data
Summary Data for Top 25 and All Institutions Over $3 Billion
Mobile Banking: You're Either In, or You're Out
10 Steps to Defusing Loan-Mod Bombs
Mailbox
Banker's Mart
To Advertise/Index of Advertisers
The Economy

ABA Banking Journal - May 2009

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