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2 Positive Indicators give Hope

According to the Department of Labor, the jobless rate fell from 10.2 to 10 percent in October. This was better than expected, and has raised hopes that full recovery is closer than suspected. Also, the number of underemployed dipped from 17.5 to 17.2 percent. Underemployed workers are those workers who are working part time, but want to work full time. These two numbers combined are significant, in that they are independent from each other and indicate positive action. Both were unexpected. Two different criterion show positive signs, and cause for optimism. If fourth quarter numbers come out positive again, then long term recovery can be seriously discussed.

False Hope Breeds Caution

Unfortunately, the trumpets of recovery have been sounded before, only to fall silent with the next economic report. A reason why analysts have had trouble pinpointing real recovery rather than positive bumps is the depth of the recession. Even with the drop in unemployment, more than 15 million Americans remain out of work. Furthermore, since the recession began, the unemployment rate has double from 4.9 percent two years ago. To gain an understanding of the depth of this recession, history can lend some perspective. Unemployment could be cyclical and season, but long term unemployment of six months or more is an indication of real trouble. Today, the number of Americans unemployed for at least 28 weeks is 5.9 million, the highest number since 1948 when the statistic was first tracked. This is pretty much the worst recession since the Great Depression, according to some economists. These numbers show how stagnant the economy has been thus far. This also illustrates why it has been so difficult for even the best economists and analysts to accurately interpret economic indicators which has led to proclaiming false starts for real economic recovery.

Still Falling, Just not as Fast

When the unemployment rate drops, many people interpret that as meaning that people have stopped losing their jobs. That is an overly simplistic view of the job market. A drop in unemployment just means that more people were hired than laid off. In November, employers cut 11,000 jobs compared to 111,000 jobs in October. It seems like a huge drop, but only amounted to a .2 percent improvement. Regardless of how small the improvement looks, this is still the best showing in the unemployment rate since December of 2007.

Timing is everything

One caution among many is reading too much into employment numbers in the fourth quarter. The number of jobs cut was the lowest since 2007, in the fourth quarter. Holiday hiring can skew employment numbers and give an overly positive read on the economic recovery. The problem is that when buying season is over, many of these new hires might be let go. The upside is that the rate at which jobs were cut in the industrial sector slowed as well. This is especially positive since that sector has been hardest during the recession.

Cautiously Optimistic

The seriousness of the current recession is hard to grasp for even the most well trained economists. There are, it seems, some indicators that troubled sectors are beginning to improve, which is a relief. Caution is still the watchword for the day.