The US economy coughed up 63,000 jobs in February, its worst performance in five years. Despite President Bush’s recent attempt to downplay recession talk, the markets and media aren’t listening.
The New York Times said the recent jobs report “revealed widespread cracks in the nation’s labor market.”
What troubles economists is that employment is considered a lagging indicator, meaning that by the time jobs are slashed revenues have dropped, pipelines have slowed, and inventory is in oversupply.
I’m watching to see whether a long-term employment split emerges in which demand remains high for “skilled” workers, particularly in the tech and healthcare fields, while “unskilled” workers account for most of the new unemployed. Think of this split as skills warfare.
Will this be the type of recession that brings down skilled workers too? There have been job cuts in biotech and high-tech companies, but mostly unskilled laborers have borne the brunt of the layoffs.
The Financial Times said that the recent payroll reports were worse than initially stated by the US government: “Adding to the headache for investors, January’s loss of 17,000 jobs was revised lower to a decline of 22,000 while an initial estimate of a gain of 82,000 jobs in December was cut to 41,000.”
”I haven’t seen a job report this recessionary since the last recession,” Jared Bernstein, an economist at the Economic Policy Institute in Washington told the Times. “This is a picture of a labor market becoming clearly infected by the contagion from the rest of the economy.”
The Wall Street Journal said the report suggests “that the housing and credit crunch is gripping the broader economy.”
This downturn won’t help the Republicans running for Congress, or McCain, but at the moment the unemployment rate remains under 5% (4.8%), an important perception barrier in an election year.
The Fed has slashed interest rates even further, a move which those of us with a variable-rate second mortgage can certainly appreciate. But more importantly, companies that choose to seek capital can do so more cheaply than before, which in theory helps stimulate job growth in this country – for both skilled and unskilled workers.
Has the downturn already impacted your life and career?