This line is from John Challenger, CEO of Employment and Outplacement firm Challenger, Gray & Christmas, Inc. whom I heard intone this phrase on NPR this morning with long, drawn-out “Oh” sounds in the middle of all three words (sort of a three-syllable spondee, for poetry fans). There’s a press release to go with his pronouncement, of course, but it falls way too short of the disappointment and despair that his phrase delivered so forcefully over the air as I heard it. The way he drew out the vowel sounds and gave equal emphasis to all three words really brought the impact of this situation home to me as I listened.
Here is that situation, then, as he explained it for the foreseeable future: we’ll potter and putter along on a very slight slope of improvement, unless some major disaster or crisis comes along to derail such modest growth as we can maintain and sustain. With this perspective in mind, tomorrow’s June employment situation summary from the US Bureau of Labor Statistics should be unusually riveting, even though I guess we should expect that report to convey something like the “same old, same old” growth trend once again.
To return to the original NPR story, they’re forecasting that tomorrow’s numbers will show 176,000 jobs added to private employment for June, which tops the May numbers by about 40,000. Joel Prakken, chairman of the company that produces the survey for ADP (its sponsor), said in the latest ADP National Employment Report:
The gain in private employment is strong enough to suggest that the national unemployment rate may have decline in June. Today’s estimate, if reinforced by a comparable reading on employment from the Bureau of Labor Statistics tomorrow, likely will ease concerns that the economy is headed into a downturn.”
This is what I call “looking for the silver lining,” when it comes to interpreting the numbers. Most economists recognize that job growth of 100-200,000 per month is needed simply to absorb the entry of new workers into the ranks of the employed. Given that current unemployment is two-plus points over what is considered full employment in the USA (which seems to work best when in a range of 5.5-6.0 percent), we really need numbers over 250,000 jobs added per month — and preferably over 300,000 — to absorb new workers, and to get the unemployed who want to be working full-time back onto somebody’s payroll. The ADP survey forecast is enough to pick up new entrants into the job force and perhaps provide a few slots for those out of work as a result of the recent downturn, but it spells out Mr. Challenger’s phrase very clearly when you consider it means five or more years before long, slow growth can make those unemployment numbers move down past 8 percent, and perhaps even dip below 7 percent after that.
And that, of course, is why tomorrow’s employment situation summary looms unusually large for the fortunes of the economy and the equity markets. With the Dow once again flirting with the 13,000 mark, and the S&P 500 on a recent high, I think it’s safe to predict that the directions of the markets tomorrow will hinge on the trends in the upcoming report from the US Bureau of Labor Statistics. Stay tuned: I’ll have more to say after I get a look at that report early tomorrow morning.