Employment Weakness: No Longer Contained?

Submitted by Rich Toscano on July 18, 2008 - 4:40pm

I just put a brief writeup about the June employment numbers up at voiceofsandiego.org. The following graph was featured:

Note that while the housing-boom sectors held fairly steady in terms of annual change, it was the non-housing part of the local economy that weakened this month. Employment was still very much positive, but the rate of annual growth declined pretty noticably from recent months. The data suggests that housing and financial market weakness is spilling over into the rest of the economy (although these numbers are subject to heavy revision).

Here is a look at the same data in percentage terms:

...and a look at how the different sectors stack up... the non-housing weakness stands out on this chart:

Fairly robust employment outside the decimated housing sectors has been a big underpinning to real estate values in the non-subprime markets thus far. If the trend of more general job weakness continues we might start to see something more like the 1990s housing bust where different areas fell at more or less the same rate. But I'd want to see a few more months of data to establish a firm trend before drawing any such conclusions.

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Submitted by urbanrealtor on July 19, 2008 - 9:54am.

The question that comes to my mind is what this means for buying power. And at a more transcendent level, population. We can't really recover well without any people or money to bring them here.

Submitted by LA_Renter on July 19, 2008 - 1:58pm.

I think what we have seen up until now outside the housing sectors is a business sentiment of a [reluctance to hire]. IMO there has been a lot of guarded optimism within the USA Corporate structure during the first half of this year. Once the reality that this current bout of stagflation is killing our profits and isn't going away anytime soon sets in; layoffs will escalate and then the USA will succumb to a true recession. The downturn in that green (everything else) line could be telling us exactly that. We probably need a few more months of data to confirm this trend. These headwinds are starting to hit hurricane force right now.

Submitted by La Jolla Renter on July 20, 2008 - 12:03am.

I think a lot of small businesses in San Diego are getting ready to cut payroll. They just don't have a choice. Sales are down and expenses are up.

We are not in a one or 2 quarter slump and the reality is sinking in.

Submitted by DWCAP on July 20, 2008 - 1:55pm.


This is the UT's take on things. 5.9% unemployment. Highest in 12 years. If this keeps up, it will be the next leg down in the market. If it is just due to High school kids looking for summer work, as they blaimed it on before, then this isnt the next leg down.

Submitted by speaker on July 21, 2008 - 9:06am.

The budget crisis will only add more negative pressure to these numbers. The democrats are calling for more taxes (sales, income, corporate). The democrats also want universal health care which will only add more to the costs of doing business in CA.

Submitted by LV Renter on July 21, 2008 - 1:49pm.

Looking at the first table one question stares me in the face. It looks like total and everything else has become uncoupled. Do you know what might have happened?

Submitted by LA_Renter on July 24, 2008 - 9:34am.

OK Piggs, the data is trickling in on the employment front


"WASHINGTON (AP) -- The number of newly laid off people filing claims for unemployment benefits bolted past 400,000 last week as companies trimmed their work forces to cope with a slowing economy and fallout from a collapsed housing market."


I found this quote in John Mauldin's weekly E-Letter last week (7/19) that puts the filing claims over 400K in perspective.


"Each week we see a release of initial unemployment claims. This week initial claims jumped to 366,000 on a seasonally adjusted basis. But what are the real underlying numbers? Every Thursday, I get a thorough review of the actual data from John Vogel, going back and looking at trends over the past 8 years in the non-seasonally adjusted data. That can be more interesting.

This week the actual number of initial claims of unemployment was 475,954, compared to 383,839 last year (2007). And the number of actual claims has been trending up. Taking the three first weeks of the current quarter, we are still below the recession years of 2001-3; but the trend is not what you would like to see, and given the decline in consumer spending (see below) it is likely to continue to trend up.

The actual data is very "noisy" and jumps all over the place, hence the use of seasonally adjusted numbers for public consumption. Economy.com thinks the difficulty may be in accounting for auto-related plant shutdowns in the seasonally adjusted number. Vogel speculates that employers are no longer waiting until the end of the quarter to lay personnel off but are doing it at any time in the quarter.

Given the issues, it is likely we will see a rise in the number back toward the 400,000 range (SA) that we saw earlier last month. But just be aware that there can be something really different in the actual numbers."


These are national numbers but I think they are pertinent to the healthier segments (so far) of the So California economy. What I am paying attention to here is how Corp. America responds to the realization that profits will not rebound this year and possibly much of next year. The rise in the weekly claims number may "may" not be noise. The data will tell the tale.

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