Westbury: Unemployment Has Peaked
Thursday, November 12, 2009 10:00 AM
The economy is returning to the "normal cycle" of employment, and unemployment may well have peaked, writes Forbes columnist Brian Westbury.
"Notice that the ratio of payrolls to household employment was remarkably steady between 2003 and 2008," writes Westbury.
"Then earlier this year the ratio plummeted as payrolls dropped much more than household employment. The past few months have simply brought this ratio back into alignment."
With his writing partner Robert Stein, Westbury reckons that he and other economists expect the normal cyclical trend to continue to reassert itself, with self-employment contributing to household employment, pushing it up faster than payrolls.
"Part of this will be due to the nascent turnaround in home building, where many contractors are self-employed," writes Westbury.
"Given that real gross domestic product growth exceeded 3 percent in the third quarter and has been accelerating in the fourth — something that did not happen in the early stages of the 1991 or 2002 recoveries — we are likely at or very close to the peak in unemployment."
The payroll survey has been improving more quickly than the household survey, writes Westbury.
"Payroll losses have averaged 188,000 over the past three months, substantially smaller than the 700,000 per month early this year," Westbury notes.
"The three-month average of payroll losses has been smaller in each of the past eight months. Temp payrolls — often a leading sign of overall job creation — increased for the third month in a row in October."
The Labor Department said Thursday that first-time claims for jobless benefits dropped to a seasonally adjusted 502,000 from an upwardly revised 514,000 the previous week. That's the fewest claims since the week ended Jan. 3, Reuters reports.
