Pink slips in U.S. declined sharply, signaling recovery, though unemployment rate is highest since the past two decades.
The Labor Department reports that companies cut jobs by 345,000 in May as compared to 504,000 in April, which is a steady decline since Q4 last year putting to rest the predicted 520,000 by the market.
Nigel Gault, chief U.S. economist (IHS Global Insight- Lexington, Massachusetts) said that the decline in job cuts indicates that the market is recovering. Unemployment rates recorded beat the1983 benchmark, a shocking 9.4% in May vs. 8.9% in April attributed to job seekers who were not active but are approaching employers now.
John Canally, investment strategist and economist (LPL Financial, Boston) said one could hope for recovery of U.S. markets by 2009 end.
Government issued bonds rates declined steeply with 3.90% return on Treasury note, higher than the benchmark recorded in 10 years and highest since the past few months.
Dollar saw huge gains in a day and stocks closed with mixed results. The Central and Federal Reserve would have to retreat from the monetary aid as recovery begins.
Market players felt that the Labor Department figures are misleading as it considered fresh ventures and excluded obsolete jobs leading to an optimistic figure, however economists tend to disagree.
The 18 month long recession has been the most retentive after the great depression with 6 million job cuts till now, however Q1 09 figures show job cuts fell by 82,000 vs. the recorded 643,000/month.
Recent increase in house sales and customer confidence indicate economic recovery and growth by Q3 09. Job cuts and decline in home prices is coercing Americans to alter their buying and spending wont. Consumer borrowing as per Federal Reserve exhibited a decline of $15.68 bn in April as compared to $16.57 bn in March.
Job cuts slowed down throughout all sectors vs. previous months. Jobs in Construction fell by 59,000 in May vs. 108, 000 in April due to the $787 bn government bailout. Service industry eliminated 120,000 jobs in comparison to 230,000 jobs in April. Manufacturing industry cut 156,000 jobs in May as against 154,000 in April, mainly due to closure of plants after Chrysler’s bankruptcy.
Industry experts say that due to decline in demand firms had cut jobs by huge numbers and as a result were cutting fewer jobs now.
Healthcare and education sectors added 44,000 jobs vs. 13,000 the month before. Hospitality and leisure sectors added 3,000 jobs.
Government sector which added 92,000 jobs in April in line with census 2010 cut 7,000 jobs in May.
Economists believe unemployment rate will decline by December 2009 and would be 10% by 2010. In May a spate of new entrants in the job market accompanied by job cuts caused a sharp rise in the rate of joblessness.
Average hours of work/week declined to 33.1 vs. 33.2 in April. Average earnings/hour increased by 3.1% vs. last year from $18.54 vs. $18.52, smallest gain in the12 month period since 2005 end.
The job market falloff that measures unemployed people, workers partially involved with jobs and part time workers working due to economic conditions increased to 16.4% in May vs. 5.8 % in April.
