Has the Employment Situation Bottomed?

05/08/2009 07:58 am ET | Updated May 25, 2011

Layoffs appear to have peaked. Initial jobless claims fell 34,000 this week to 601,000. Continuing claims edged up to a new high of 6.351 million from 6.295 million. However, initial claims, which reside in the index of leading economic indicators (LEI), appear to have peaked on March 27 at 674,000. The four-week moving average for initial claims appears to have peaked at 659,000 on April 3. This also comes on the heels of a large pullback in the year-to-year layoff announcements as calculated by executive outplacer Challenger Gray & Christmas.

Let's go to the data.

That's a good looking chart of initial unemployment claims. The bottom line is we have enough data to make a call that the 4-week moving average appears to be topping out. That's a very good sign. But then there was this passage from the Econoday report:

Initial jobless claims showed improvement in the latest week but continuing claims set another record high. Continuing claims in the April 18 week jumped 133,000 to 6.271 million, another record level and the 15th straight increase. A month-to-month comparison, useful for a gauge on the April employment report, showed significant deterioration, up 704,000 from 5.567 million at mid-March. But initial claims appear to have peaked in March, suggesting that continuing claims may plateau within a few months. Initial claims for the April 25 week slipped 14,000 to 631,000, down from 645,000 the week before.

While initial claims are topping, continuing claims are still setting records. That indicates that while the immediate lay-off situation is improving the continuing situation is still poor at best. Here are some relevant charts from the BLS that explain the situation in mare and better detail. I have used (when possible) a time frame that goes back to 1980.

Let's start with the overall unemployment rate which currently stands at 8.5%. This is the second worst rate of unemployment in the last 30 years. Let's delve deeper into the data:

Above are the charts for the number of people unemployed for 15+ weeks and the number of unemployed for 27+ weeks. While the percentage of the population represented by this number would be lower now than in the early 1980s because of the population increase, the absolute number of both figures is at a historical record. That tells us that the rate of job creation -- the flip side of job destruction -- is deteriorating right now.

Above is a chart for the number of people who are part-time for economic reasons. Again -- the absolute number is at a nearly 30 year high.

Finally, the median weeks people are unemployed is high, currently standing at 11.2 weeks. The has been higher twice in the last 30 years.

So -- the rate of job destruction appears to be topping. HOWEVER, we're not out of the woods yet as the rate of job creation has yet to pick up.