Monday, May 11, 2009

Job loss hurricane is over, for now

In April, the Canadian economy created 36,000 jobs, almost entirely in self-employed. I am self-employed, but a structural shift of that magnitude does not take place in one month. More likely, you have a bunch of people looking for work who settled for some part-time work and call themselves self-employed.

Nonetheless, and it is risky to base this on one month of data, but it appears as if the job loss hurricane (50K to 100K per month) is over for now. The unemployment rate spiked from 6.2% in October to 8.0% in March, a huge spike of 1.8% for just five months.

As I mentioned back in early February, look for the following in 2009:

I would look for an average of 50-60K in job losses (600K-720K annualized).

I suspect that we are in the midst of a job loss hurricane that is tracking
the steep fall in GDP in recent months. Once this round of job cuts is finished
(spring?), we may get a lull for a few months where job losses continue but at a
much lower pace. Another round may begin in the fall once people return from
summer vacation and realize that the economy won’t magically pick up in

Welcome to that lull, as this round (357K in 5 months; 71K per month) appeared to end in March. Gut feel is that we now moderate our job losses to something in the 30-40K range for the next few months. That job loss hurricane was a reaction to the sharp fall in GDP in Q4 2008 & Q1 2008, and now that the economy is shrinking at a slower rate, the job market will deteriorate at a slower rate.

I think the risk will now be in the fall months. At that point, I think the stock market and economy will be still be sinking and companies will abandon hope of an economic recovery in 2009. The result will be a big wave of layoffs and a climb toward 9% unemployment. I hope that I am wrong on my estimate for job losses in the 600-700K range for 2009.

My two cents: If you are looking for a job now or to change jobs, hurry before the summer shutdown of July/August and the next round of layoffs in the fall.

Let's leave this blog with a great quote by an esteemed bank economist in February:
“The recession deepened at the start of 2009, and we are likely to see the
jobless rate rise above eight per cent by year end,
” warned Benjamin
Reitzes,economist at BMO Nesbitt Burns.

My thought: At this rate, it will be at 8% in April. By mid year, at the
absolute latest. 9% by year end is looking conservative. Remember in the last 2
recessions, unemployment went to 12%.

Fact: It was 8% in March & April. Any tick up and Reitzes' warning will be as useless as most of the ridiculous statements coming out of the banks in recent weeks. A blog on that is needed and in the works...

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