Following up on last month’s surprising drop in the unemployment rate from 8.1% to 7.8%, weekly initial unemployment claims plunged unexpectedly to 339,000 during the week ending October 6th, their lowest level since February 2008. The four-week moving average, which smooths out volatility, slipped to 364,000, its lowest level since May 2008. Some of the drop appears to be related to seasonal adjustment factors, but the underlying trend suggests some real improvement in the labor market.
The news for the labor market isn’t entirely positive, however.
In “This Time Is Different: Eight Centuries of Financial Folly,” economists Kenneth Rogoff and Carmen Reinhart show that recessions precipitated by a financial crisis are longer and deeper, and the recoveries are shallower, than ordinary recessions – a view that helps explain the current disappointing recovery.
- Economists surveyed in a recent Wall Street Journal poll expect the unemployment rate to remain unchanged at 7.8% in June of next year and decline just slightly to 7.1% by the end of 2014. Fortunately, just 22% of the economists expect a recession to begin in the next 12 months.
- The Job Openings and Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics was mixed in August. Hires rose to 4.39 million from 4.28 million in July, but separations increased more sharply to 4.35 million from 4.01 million, pushed higher by an upward trend in layoffs.
For commercial real estate, the outlook is mixed: a sluggish leasing market but a more vigorous investment market as buyers chase yield, future upside potential and an asset with a reputation for hedging against inflation.