U.S. Unemployment Rises 4.9% in One Year

The U.S. unemployment rate spiked up 4.9% over the past 12 months based on January's 7.6% rate. This is the largest one-year increase since 1975 (the year after I graduated from high school - yikes!).

While the 7.6% rate seems awfully high, and it certainly is by any recent standard, the sheer volume of job losses is more staggering. 3.6 million jobs have been lost since the decline started in late 2007, but the past three months (11/08 - 1/09) have averaged approximately 500,000 jobs lost per month, an unprecedented pace.

More scary perhaps is the the BLS (Bureau of Labor Statistics) “U-6″ rate, that includes disaffected workers who have dropped out of the labor force in frustration and those who are "marginally" employed (such as those working PT, but wanting FT work, etc). This wider measure is now at an astounding 13.9% rate (up from 13.5% in December), or about one in seven workers in the U.S.

We at AHRS believe that joblessness will continue to rise at a fast clip, and unemployment will approach (or maybe even exceed) 10% before we hit bottom.

Merit and other salary increase budgets will continue to decrease, even though they are near historic lows already.

Our hope (and it's just that, a hope) is that the labor market and business demand will bottom in the second half of 2009. This hope assumes that the alleged stimulus plan (that full of all sorts of non-stimulus pork) has its intended affect, that the banking system can be stabilized (at taxpayer expense, of course), and that business and consumer sediment bottoms and starts to improve.

Even if all of these good things occur, it will likely be the second half of 2010 (at the earliest) before the labor market would start to rebound. The labor market tends to be a lagging indicator, as employers are generally reluctant to open their wallets, until they feel confident that a true turn-around is in place.