The June employment report suggests that the alleged green shoots are mostly yellow weeds that may eventually turn into brown manure. The employment report shows that conditions in the labor market continue to be extremely weak, with job losses in June of over 460,000. With the current rate of job losses, it is very clear that the unemployment rate could reach 10% by later this summer–around August or September–and will be closer to 10.5%, if not 11%, by year-end. I expect the unemployment rate is going to peak at around 11% at some point in 2010, well above historical standards for even severe recessions.
It’s clear that even if the recession were to be over anytime soon–and it’s not going to be over before the end of the year–job losses are going to continue for at least another year and a half. Historically, during the last two recessions, job losses continued for at least a year and a half after the recession was over. During the 2001 recession, the recession was over in November 2001, and job losses continued through August 2003 for a cumulative loss of jobs of over 5 million; this time we are already seeing more than 6 million job losses and the recession is not over.
And they have not even begun to see the decline in lower wage jobs that will occur this month with the minimum wage increase of 10.5%, The pressure on all hourly jobs will be huge. The person that was making minimum plus 20% will expect an increase also, so it is going to bump almost all lower wage persons up. That is retail and entry level which needs no more pressure on them right now. Look for reductions accross the board in addition to price increases. I have already seen a lot of July/August increases announced. Farm costs are going to go up so food prices will also. I have said for years, the main reason for the minimum wage increase was to increase SS income. Thats 13% of every dollar that is increased going to the government.