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This Morning's Employment Report

Posted by: Michael Mandel on June 06

As shown by my last couple of posts, I’ve been skeptical of the upbeat “no recession” story that many economists and journalists have been putting out. This morning’s jobs report confirms my sense that we have at least one more downleg to go…and it may be a deep one.

The unemployment rate jumped from 5 to 5.5% That’s the highest level since 2004. Equally important, the number of jobs continued to fall. Without the continuing hiring by healthcare, social assistance, and education—all government-funded to a large extent—we would be in a spectacular downturn. Private sectors jobs fell by 66K in May…outside of healthcare, social assistance and education, private jobs fell by 120K.

Over the last year, the contrast is even greater. Since last May, private sector jobs are up by 16K. But healthcare, education, and social assistance were up by 577K. That means almost everything else is in free fall.

Will the Fed make another move to cut rates after this employment report? Not right away. But if it continues another month, the threat of a deep recession could be the trigger for more rate cuts.

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Reader Comments

Sally in Chicago

June 6, 2008 10:57 AM

I haven't believed the Govt unemployment figures since 2005, when I was hired into a (low-paying) job in education. I've been applying for better paying jobs in the same sector for 2-3 years and I guess everybody else has been too, because I'm not getting any action. The public is aware that govt-education-healthcare are the safest industries to be in right now. Let's face it, 5.5% is really more like 10% because you figure there are a lot of temporary, non-permanent, still looking citizens out there. If they're temps they work a few weeks and then go on U/E, and the discouraged ones just stop looking and take odd jobs.
The highest U/E is with black youth and young people. At least the Illegal mexicans have someplace to go when there's no work, but what about the black youth?
The writer's assessment is dead-on. We are in a recession -- or a deep slowdown.

Brandon W

June 6, 2008 12:07 PM

It's too late. The Fed's loose-money policy has sent us on a course toward a hyperinflationary depression; whether the government's methodology allows that to be shown "officially" is beside the point. Without the gaming of CPI methodology (which causes GDP to report higher than is true), we've been in a continuous recession since 2006 and mostly been in recession since late 1999. The U-6 unemployment rate (the only rate I consider a real gauge of the labor market) jumped to 9.7% today, and when you add back in people who were "defined away" during the 1990s, that comprehensive unemployment rate jumps to about 14%.

No, there's no way out. Further rate cuts and loose-money policies will exacerbate the hyperinflation. I still contend that inflation is running at 11.8% - and even if you want to be conservative and only rewind to 1992 methodology, is about 7.2%. Not the mere 4% that is reported by government officials.

The rate should - if anything - be raised. Yes, that will cause a deep recession too. Perhaps a depression. We have spent the past 25 years gaming the numbers for short-term gains; gains only on paper. The game's over. We built this house of cards and now we have to live in it.


June 6, 2008 12:28 PM

I agree. Plus the Birth/Death model added 217,000 "phantom" jobs and we still lost almost 50,000.

New England Realist

June 6, 2008 04:08 PM

Brandon W. is right on. Our Government has used foreign imports from China to depress inflation, at the cost of jobs and our standard of living. Then the same government excludes food and energy from the CPI, creating a new bogus term called 'core CPI'. Government is not the solution, it is the problem. We need an independent candidate to save the country. No professional politician is willing to make the tough decisions to fix the country.


June 6, 2008 06:28 PM

Brandon W is right on.In very simple terms we have been living beyond our means to the tune of $3 trillion for the last 10 years,largely because the rest of the world was willing to lend us the money.No matter how you slice it or dice it,economic fundamentals dictate that we must now live below our means for the next 10 years in order to pay back the money we borrowed from foreigners and then beyond that we can go on living at our means.The sooner we face up to these facts the better.Printing money or trying to artificially prime the economy will only prolong the agony!!

Thomas A. Coss

June 7, 2008 11:46 AM

Brandon- You've obviously given this considerable thought, and with regard to inflation, I couldn't agree more, still I'd like to know how you get from where we are to a depression. The dollar has fallen, may fall more against foreign currencies, isn't that the relief valve to our buffoonery?


Mike Reardon

June 7, 2008 10:50 PM

Last year had greater profits by a majority of the nations major corporations and this year will also give greater profits to some of these same investor entity. Maybe slowing of there massive ROI will be noted but you forget who is has been taking it off the top in this economy over these last ten years.

Completive forces investing in this economy have not needed to apply have they. We have had deflationary prices in place for 15 years at least. They only gave those investors greater profits.

Both democracies and dictatorships have found policies to create employment when society needs to give social stability. If we need to go there we will to restart the economy. And if the greatest profits in history are held in check, maybe a decent wage can be found.


June 9, 2008 09:54 PM

Relax, people. The recession began in Dec/Jan, and barring Oil shooting up to $200, will be over by August. 8 months total, which is the typical recession (just like the last two).

Job losses lag the recession, of course. We may lose 1m jobs and the UE rate could drift up to 6%, but that is it. Job gains may not return until 2009.

But the fact that the stock market is treading water and not crashing tells us that the worst may be over as long as Oil goes no higher than $150.

Joe Cushing

June 12, 2008 09:38 AM

I heard, on NPR, unemployment is the highest it's been in 20 years. You say 2004. Is the 20 year figure accurate?


June 18, 2008 02:56 PM

Joe - NPR is full of it... simply go to the BLS and look for yourself. Not sure where that 20 year figure came from. They may have been referring to the change in employment. Also, note that in this employment report we are seeing the direct effects of an increase in the minimum wage and some seasonality from students seeking employment, as the change in unemployment is concentrated among the 18-24 year old cohort.

Thank you for your interest. This blog is no longer active.



Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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