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Friday, December 5, 2008

Unemployment Apocalypse

The unemployment numbers came out today, and they were worse than even the worst of the bears expected. Here are some reactions (from the Wall St. Journal):

  • This is almost indescribably terrible. In the past six months the U.S. has lost 1.55 million jobs, almost as many as were lost in the whole 2001 recession, which included 9/11 and the two months after. The pace of job losses is accelerating alarmingly, as this report attests, with steep drops in most sectors but the biggest deterioration in services — down 370,000 in November after 153,000 in October. Note education/health and government added 59,000, so core private payrolls even worse than headline. Desperate. –Ian Shepherdson, High Frequency Economics

  • The bottom drops out of the labor market… History tells that once the labor market weakens as much as it has in the past several months, job-shedding takes on a life of its own and tends to persist for a long while. We expect labor market conditions to be dreadful for many months to come and consequently for consumer spending to continue to decline. The U.S. consumer, which for so many years was the global engine of growth, will remain a significant drag on economic activity in coming quarters. –Joshua Shapiro, MFR Inc.

  • This was much worse than was expected and represents wholesale capitulation. The threat of a widespread depression is now real and present. –Peter Morici, University of Maryland

  • The official unemployment rate is now 6.7%, but even the government now acknowledges that that does not take into account discouraged workers.

    Not surprisingly, the market doesn't like it. The SPX took a drop right at the open and has been in virtual freefall since, with no sign of a bottom yet. True to form, the Russell 2000, which was relatively strong yesterday, is weak today. Among the sectors, the least battered are the defensive XLP and XLV, XLF is trailing a bit, XLB and XLE getting hammered. XLY, which was the leader yesterday, is among those getting crushed today.

    I mentioned HURC being scheduled to report today, but there is no news on it. There is not a hint of a breakout or even a new high yet this morning. I will be keeping an eye out and will post anything as soon as I see it.

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