Unemployment jump could be HUGE.
By Daniel at 3 December, 2009, 6:30 pm
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I would say it will be at least 10.5%, but it can be up to 10.7% as well tomorrow.
Here is why, sorry for the long analisys, but I want everybody to understand, I hope it worths to read:
Unemployed are counted as unemployed/workforce. So actually who is out ot the labor force, is technically unemployed, while he/she isn’t counted, just if he/she applies for benefit.
Workable population (236.5m) is growing around 225k/month, stable grow.
Labor force is a bit above 65% (154m), declining slowly.
Number of employed (138.3m) declining about 400k/month, stable for more than 6 months.
Putting these together it’s quite easy to predict the numbers. (Unemployment~=15.7m/154m)
The only question is basically how many people get out from the labor force, and how big is the labor force.
One person out from the population is either employed, unemployed, or out. Employed are shrinking for sure! So the only question is whether those get out of labor force, or get unemployed. If they get out, then unemployment does not increase.
The historical average of getting out from labor force was about 100k / month. In the last 6 month it was about 300k / month which is not sustainable. So I expect them to grow less. The less they grow, the more the unemployed grow. 150k people less employed cause 0.1% increase if they get unemployed, and 0% if they get out.
The other, and bigger influence, is the size of the labor force. If, by population or aging reasons, many enter the workforce, but they don’t get employed (and they will not), then they get unemployed. If 150k people enters (and it does since population is growing by 225k and 65% of that must enter sooner or later) and they don’t get job, that’s automatically increasing unemployment 0.1%.
Conclusion: even is economy isn’t shedding jobs unemployment increases 0.1% every month! 150k jobs needed for stable unemployment.
The size of the labor force was between 153.5m-155.1m from 2008 jan. Now it is 154m, but population is up 4m, so work force should be up by 2.6m (65%) - but it isn’t they all got out. Why? How?
According to these I expect work force to start growing, and less to get out.
Just as an example, if
- work force climbs 300k (it shed 500k 3 month ago, so it’s possible)
- employed shrink 450k (average)
the 2 together adds 750k unemployed of which
- 150k get out (average)
resulting 600k unemployed
Than unemployment increases 0.4% in just one month.
And the numbers from the past 6 months:
Year / month Popul. Workf. Ratio% Emplo. Ratio% Unemp. Ratio% Out
2009. May 235452 155081 65.87% 140570 59.70% 14511 9.36% 80371
2009. Jun 235655 154926 65.74% 140196 59.49% 14730 9.51% 80729
2009. July 235870 154504 65.50% 140041 59.37% 14463 9.36% 81366
2009. Aug 236087 154577 65.47% 139649 59.15% 14928 9.66% 81510
2009. Sep 236322 154006 65.17% 138864 58.76% 15142 9.83% 82316
2009. Oct 236550 153975 65.09% 138275 58.45% 15700 10.20% 82575
—- and an average possible scenario:
2009. Nov 236775 154100 65.08% 137875 58.23% 16225 10.53% 82675
Note: I just assumed 125k plus entering the workforce and 100k getting out, assuming sg. more close to historical trends would look like this:
2009. Nov 236775 154300 65.17% 137850 58.22% 16450 10.66% 82475
Now, It’s hard to expect unemployment to remain 10.2% tomorrow.
Thanks for reading 
- Roka
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