When will the unemployment rate hit 10%?

Sagarin wrote:

Ok Flagpole. This is getting fun. Go find me a thread where I've said the "apocalypse is upon us." I mean, seriously, corroborate your bullshit with something besides cute little rhetoric (And, of course, that gives you the necessary latitude to actually "define" your version of apocalypse, which you will, UNDOUBTEDLY, fully exploit to advance your continued equivocation). "I love peeps" was calling for the apocalypse, in the very same vein that you previously conceded (or is it more properly labeled "conceited," which seems your MO?) that at least I wasn't calling for everyone to stack up on guns and ammo and head for the hills on a prior thread. Back up your bullshit.

You weren't an English major were you? I didn't say you ever said the apocalypse was upon us. I SAID you've never before said it WASN'T upon us...there's a difference. You've always walked a fine line of doom leaning (far leaning) but never quite committing one way or the other, even never as far as saying the apocalypse ISN'T upon us...until today. Now you are committed to the apocalypse NOT being upon us, AND you are right about that, so good show. I'm giving you props for a correct stance brother, and it's not veiled or backhanded in any way.

So the answer to the original question is, as predicted, right now. But what would anyone discern in today's numbers that would suggest unemployment is peaking?

So let's see, unemployment is 10.2 officially (compare to 1983, when growth hit 8 percent and took that number down some). This present level will inevitably result in further residential foreclosures

Productivity numbers are off the chart. Cisco sees orders improving, a big bellweather.

Very notably, retail job losses continue apace as do construction job losses. Commercial office space well oversaturated in most mature markets for at least 5 years.

Dow is still over 10,000 (as I write this).

What does this all mean, anyone venture to guess?

As I wrote on the stimulus thread, the thing about today's payroll report is that, while employment is "typically" a lagging indicator (it hasn't always been in every cycle), the household survey is a much better leading indicator than the establishment survey, and things aren't shoring up there; nor are they for small businesses, which are responsible for 70% of the job creation in this country. And the traditional "leading indicators" are out of kilter, based heavily on the fiscal profligacy of the Fed and the failure to properly address the insolvency and bank mummification issues.

There are a lot of shenanigans being played in the financial markets right now; hence my, "So let it be done" remark. Somebody wants (needs) this market to go higher still, though today's close should be interesting.

http://globaleconomicanalysis.blogspot.com/2009/11/jobs-contract-22nd-straight-month.html

With respect to the OP, I think the much more interesting and difficult question is: "When will the unemployment rate drop below 9%?"

With low inventories, sky-high productivity, and increasing corporate profits, I suspect that job growth will start sometime between Monday afternoon and the end of Q1 2010, with unemployment falling to 9% by the end of 2010 and dropping to 6% by the end of 2013. Not even close to the tired, morbid refrain of a jobless recovery that we've been warned about. Rather a slow climb back to normalcy that hold promise to fill the gap that will be left by an orderly unwinding of federal life-support.

Others?

Flag, at least Sags got balls to state what he thinks.

Shadow stats has unofficial unemployment (the real number) 22%. I know plenty of college grads looking for jobs right now- and they aren't finding them! Unless its cleaning toilet bowls...

http://www.shadowstats.com/

Underemployment together with Unemployment is heading towards 50%. Thats 1 out of 2. What recovery will come of that?

We're just waiting for the next leg down. Only way to create an environment conductive to growth is to get banks to lend, and after CIT/Capmark they are hoarding cash again.

So...how long until wave 2 down?

Today might be a good time to pull out of the stock market for a while. We are due for a nice drop.

Agreed. Indeed, despite the administration's rhetoric, this is what Treasury and FDIC need for the money center and regional banks to do; they have had a look at the off balance sheet obligations and understand the risk. The small banks have no cash to hoard, are in real trouble, and have no safety valve. So without small business lending we can rule out growth for half the labor sector.

For the other half, big question mark in my book, but a bad portent if J&J is making big cuts. I unfortunately am going to stick with speculating that real unemployment is at 12 percent by late 2010. That will be short term extremely bad news for the market, who knows long term.

ShadowStats was interesting, I like the modeling on CPI, but the "real" unemployment numbers depicted there looked too high in the 90s.

webby wrote:

With respect to the OP, I think the much more interesting and difficult question is: "When will the unemployment rate drop below 9%?"

With low inventories, sky-high productivity, and increasing corporate profits, I suspect that job growth will start sometime between Monday afternoon and the end of Q1 2010, with unemployment falling to 9% by the end of 2010 and dropping to 6% by the end of 2013. Not even close to the tired, morbid refrain of a jobless recovery that we've been warned about. Rather a slow climb back to normalcy that hold promise to fill the gap that will be left by an orderly unwinding of federal life-support.

Others?

Webby, I'd agree that 2013 is a pivotal year, demographically speaking, and could alter the economic landscape significantly, predicated upon, of course, policy-making in the interim and thereafter. However, even though you are paraphrasing Crescenzi (sp?) from Pimco (I don't know if you saw him on CNBC this morning, but it sure sounds like you did and you are parroting his stance), I don't see job growth starting on Monday or in the next three months, despite the improving second derivative in the establishment survey.

Firms will increase hours or temp or both long before they start hiring, and they, correctly, just don't see a good risk/reward scenario, nor can they get credit anyway. And the household survey is a much truer leading indicator. Moreover, you've been warned about a jobless recovery for quite some time and that's what we're in. What do you call RIGHT NOW?

We need to grow at roughly 2.5% baseline to meet the growth in the labor force and even "official" GDP estimates are coming down in the neighborhood of 2.4% for the next several years. Even Fed officials have overtly acknowledged this. You use the word normal, and I don't know what your definition of normal is, but new normal would be far more adequate for the foreseeable future, a future that's going to see many fits and starts or a long, tough slog. Could we see job growth here and there? Of course. Could we seee a series of dips back into recession or malaise? Absolutely. Could we see worse? I'll bet there's odds in Vegas on it.

I will, however, concede, that 9.5% productivity is not a sustainable dynamic, historically speaking. At some point, firms will need to start hiring, if only part-time or temporarily to fill the gaps, but that's far from predicting a robust return to normalcy. And I do not think we've hit the peak in the unemployment rate yet, so perhaps an even more apropo question is when do we reach 11%? Remember, states and municipalities have yet to really drop the hammer. I wouldn't be at all surprised if California defaulted on some of its debt (which, from a creditor's standpoint it already, in essence, has when you look at the actual covenants). Here's a read you will enjoy:

http://www.financialsense.com/Market/daily/friday.htm

Mtn Dew wrote:

Today might be a good time to pull out of the stock market for a while. We are due for a nice drop.

Personally, I've been doing this with my long-term money. If we see the push to an S&P 500 of 1150 +/-, I will probably jump out of the aircraft completely.

If I owned a business, there's no way I'd hire a soul or expand in any way until I knew what it would cost me in terms of health care, energy (cap and trade), taxes (both the expiration of cuts and Pelosi's proposed surtax), etc. Even assuming for argument's sake that all of these proposals are brilliant and in the long-term best interest of the country, the uncertainty has the effect of putting capital on strike, especially for small business owners (who create the majority of the jobs).

Sagarin,

You are obviously very educated in economic systems and theory. I still don't see how the advice that Flagpole is giving the readers of Letsrun is that bad. It seems to me that Flagpole is giving financial advice to people who are not as educated as you about the market and retirement. From what I gather, Flagpole advocates the following:

1.Live within your means

2.Save your money

3.Build up emergency fund

4.Eliminate Debt

5.Contribute to your 401k up until the match and then start contributing to your IRA

6.Invest in low-cost index funds for the long term ie. 30-40 years (he seems to be advocating Vanguard, which certainly do the job. However I would argue that Charles Schwab recently introduced ETFs might change the index investor's landscape)

7.If you are going to buy a house, make sure you have a 20% down payment.

Certainly all of these points are not revolutionary by any means, but it seems like sound advice to me. Flagpole is only talking about the DOW hitting 10000 to illustrate how drastically the market ebbs and flows. I am fairly certain that if people apply this advice to their own financial life, they will be able to eventually retire without spending all of their time focusing on lagging or leading indicators micro/macro cycles and what not.

Sagarin wrote: However, even though you are paraphrasing Crescenzi (sp?) from Pimco (I don't know if you saw him on CNBC this morning, but it sure sounds like you did and you are parroting his stance) . . . Moreover, you've been warned about a jobless recovery for quite some time and that's what we're in. What do you call RIGHT NOW?

Didn't see the smart man from Pimco you write of, but I'll look for him on youtube in the spirit of only paying attention to people who agree with me. I posted the same thoughts a few days ago in a thread titled "jobful recovery," if you are interested.

What we're in right now could be a very standard recovery -- with job losses peaking soon after the economy resumes expansion, and then growing steadily throughout the rest of the recovery.

Gamecock made some great points. And while I'll also acknowledge the slight uptick in M2 that could be a slight tell of things to come, I do not see THIS recovery on solid footing. So, yes, it's possible we get a mini-recovery, but without fundamentally restructuring the foundation upon which it is built, it would be a superficial recovery at best, with more severe ramifications down the road.

Flagpole is great for personal finance. But he generally regurgitates Dave Ramsey. The problem he has is with macroeconomic theory.

Hey this thread actually has some pretty good insight and debate. Sagarin, I'm going to knock you because although it certainly sounds like you know your macro/micro/technical indicator stuff - you're writing and tone sometimes reads like a guy who slaves over analytics and powerpoint decks, knows all the relationships and jargon, but has little experience actually running a business. That doesn't mean that any of your conclusions are flawed just that you and Flagpole are two peas in a pod. I'd also add that most of us are clear about who your boy is/was over the last few years and how that worked out for all of us. Beyond that I have nothing substantive to add to the debate so who's the douche now? Webby and gamecock deserve recognition for their contributions as well.

As you were gentlemen.

In Sagarin's defense, he has given Bush as much blame as Obama.

Unemployment at 10.2% and climbing..........

I never once said Flagpole doesn't give solid, if not obvious, advice for the long-term, rudimentory investor, and I accept that he may have "channel checks" in his line of work that enhance his ability to perceive anecdotal economic conditions. But I think it more likely that he "knows enough to be dangerous." His strategy works for him, and that's fine. I'm not arguing with it. But, this is my background, my living, and my general orientation, summed up nicely by one John Hussman, who I quite like:

Portfolio:

"In short, a convex return profile – what we view as the hallmark of an effective risk-managed investment strategy – is the result of repeatedly accepting greater levels of market risk in conditions that have historically been associated with strong return/risk profiles, and repeatedly avoiding market risk in conditions that have historically been associated with poor return/risk profiles."

Macro-strategy:

"The alternate possibility, which is the one that I personally subscribe to, is that the recent downturn was the initial phase of a more prolonged deleveraging cycle; that the advance we've observed in recent months most likely represents mean-reversion – qualitatively and quantitatively similar to the large and often abruptly terminated “clearing rallies” of past post-crash markets; that major credit losses are continuing quietly but are going unreported thanks to changes in accounting rules by the FASB this past spring, which allowed for “substantial discretion” in accounting for loan losses and deterioration in the value of securitized mortgages; that a huge second-wave of mortgage losses can be expected from a reset schedule on Alt-A and Option-ARMs that has just started (following a lull in the reset schedule since March) and will continue into 2010 and 2011; that intrinsic economic activity remains abysmal; that recent GDP growth is an artifact of massive fiscal stimulus that is unlikely to have sustained follow-through; and that recent market valuations are not representative of those observed at the end of most post-war recessions, but are instead similar to those observed at major market peaks prior to the mid-1990's."

http://www.hussmanfunds.com/wmc/wmc091102.htm

I cannot time the market. No one can, which is why Flagpole's "advice" is fine for most. I am more comfortable with a more nuanced approach. That's why I jumped out a bit too late in January 2008 (around Dow 13000, despite warning about the "Great Deleveraging" in 2007), started incrementally adding back in November of 2008, even though I was still bearish (and still am in the macro picture), and started unloading again a few months ago and have accelerated it here recently. But, that's long-term money, not the trading accounts. I think we will "re-test" 1100 on the S&P 500 and probably higher, but my nose is beginning to bleed after the trajectory of this move.