A Serious Degradation in Employment

Unemployment Measurements

The serious degradation in employment is emphasized by the more rapid unemployment increases in the measurements based on a 40-hour week (U-7 and U-9) compared with Labor's "body count" measurements (U-3 and U-6).

Alarming News

Stock and bond market action following the announcement of the monthly employment data indicated a rather sanguine reaction from investors. Stocks closed fractionally lower, while bonds sold off marginally. These historically large negative developments in the labor market are apparently just not that big a deal for investors.

For my part, this is alarming news and strengthens my conviction that the rally from March 9 is over. Only a reversal of the contractions in the number of people employed and those that are available for work -- the labor force -- can provide a basis for economic improvement. These things are needed for an increase in consumption, a bottom in the housing market and to avoid further corporate cost-cutting. Reducing costs is primarily management-speak for cutting employment. This is a self-reinforcing spiral that must be broken.

-- Written by John Lounsbury in Clayton, N.C.

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