From Jan Hatzuis’ team at Goldman Sachs (emphasis ours):
The best news from the [US] labor market in recent months has been evidence that layoffs continue to decline. However, the other half of the labor market picture—hiring—is still missing as firms largely are utilizing their existing workforces to push up production rather than adding new workers.
The net result, in our view, is still job destruction. We forecast a loss of another 100,000 payroll jobs in the November employment report, to be released tomorrow morning. Last month’s sharp rise in the unemployment rate to 10.2% looks to us like a short-term overshoot, although we ultimately expect unemployment to drift up to 10 ¾% by early 2011.
To put that figure into context, a Reuters poll suggests that 130,000 jobs were lost in November, compared with 190,000 in October. Meanwhile, Bloomberg, which polled 82 economists, estimates 125,000 US workers lost their jobs last month, and the jobless rate will have held steady at 10.2 percent.
And here’s where the other big houses stand:
Change in Non-Farm Payrolls M/M (Nov)
Morgan Stanley -75K
BNP Paribas -130K
JP Morgan -100K
Credit Suisse -50K
Goldman Sachs -100K
Deutsche Bank -90K
Bank of America -125K
HSBC Markets -140K
So Hatzuis’ team of sometime clairvoyant economists are by no means the most bullish.
And here, we think, is why:
Nonfarm business productivity has grown at a blowout rate of 7½% over the past two quarters, reflecting a turnaround in activity with firms still in cost-cutting mode. Even those firms that are increasing production are doing so largely with their existing workforce. This is a common pattern in the early phase of business cycle recoveries, although productivity gains look strong at this point even if we take that into account. With an exceptionally high number of involuntary part-time workers at present, a significant portion of any increased labor needs seem likely to come from increased hours for existing employees rather than from new hires. The strong productivity trend has continued in the early fourth quarter, with growth at roughly a 3% pace while hours worked remain in decline.
Where does all this leave us? We expect a decline of 100,000 payroll jobs in tomorrow’s report, with an increase in average hourly earnings of just 0.1%. Although we think unemployment has further to rise, last month’s increase was somewhat larger than we expected and may represent a short-term overshoot, so we see a slight pullback here to 10.1% on the unemployment rate.
Related link:
US unemployment hits 10.2 per cent – FT Alphaville