The Employment Situation

Last week the Bureau of Labor Statistics (BLS) announced that the national unemployment rate for May was 9.4 percent. For South Carolina, the May numbers will not be released for a few more weeks, but as you can see from the figure the unemployment rate in South Carolina is likely to be about two percentage points above the national average; perhaps close to 12 percent.

While there are plenty of signs that an economic recovery may be under way, we should not expect to see the recovery reflected in the unemployment rate any time soon.

When a recovery begins, firms in the industries where business activity show signs of increased activity usually do not rush out to hire workers. Instead they wait to see if the recovery has taken hold before they increase their payrolls. In other industries that are slow to rebound, the firms in these industries may continue to layoff workers.

Thus, even though economic activity may be picking up there still may be increases in the unemployment rate.

Thus while the unemployment rate may still be increasing, there are some indications that labor market conditions may be improving. From September through April, the number of job losses was a major concern for policymakers. For example, employment dropped by nearly 750,000 in January.

Over this eight month stretch, the economy lost on average nearly 570,000 jobs. On Friday, the BLS reported that 345,000 jobs were lost. While this is still a notable drop in employment and policy makers should remain concerned about this rate of job loss, the fact that economy is not losing as many jobs is an indication that the recession may be abating.

Consistent with this data, the initial claims for unemployment insurance data, while still at elevated levels, looks like they may have peaked as well.

Usually one of the first signs that a recovery is under way is when these data reach a turning point and initial claims for unemployment stops rising.

Over the last five weeks, the initial claims for unemployment indicate that the worst part of the recession may be behind us.

For those of you who are interested in tracking this (nascent) recovery, these data are released every Thursday morning. I am going to keep an eye on this series to see how it moves over the next few weeks. If this numbers continue to improve, I will have more faith that this nascent recovery has legs.