FRIDAY MAY 28, 2010

Analyzing Unemployment

The contrast between the Consumer Confidence report and the depressing market activity this month is startling.  How can the market be tanking while consumer confidence taps a new 26 month high?  It seems that the consumer is becoming more optimistic on their employment front.  This is positive for the market, if it is sustainable.  There is no doubt the Greek tragedy will dent some of the new found confidence.  But nothing raises the spirits like a new job!

It is interesting to analyze the unemployment statistics.  The  headline rate remains elevated at 9.5%.  But that number does not tell the whole story.  There are a variety of other statistics that are compiled to measure unemployment and collectively they are posting readings that suggest the headline number should be on its way down.  Average hours worked, average hourly earnings and productivity have all improved significantly.  The hire/fire ratio has finally bottomed as well.  However, the bottoming of that number has occurred because the "firing" part has stopped.  Good news, indeed, but what the economy really needs is hiring.  Clearly, if business is good, a company can only go so far with increase hours and productivity.  At some point, they will need to hire additional labor.  The strong Corporate earnings and balance sheets would suggest that companies can afford to hire. These numbers are all in ranges where in past recoveries the unemployment rate would already be declining.

All of this would suggest that improvement on the employment rate should be on the way.  Let's hope.

POSTED AT 1899-12-30 09:40:00.0

KEN ENTENMANN, CFA
SENIOR VICE PRESIDENT AND
THE DIRECTOR OF INVESTMENT MANAGEMENT SERVICES

Ken is a Senior Vice President and the Director of the Trust and Investment Services at Alliance Bank, N.A. He has 23 years of investment experience and oversees the management of assets totaling $1 billion. He holds a B.S. in Applied Economics and Business Management from Cornell University and an M.B.A. from the William E. Simon Graduate School of Business Administration at the University of Rochester. He has also earned his Chartered Financial Analyst designation. He is a member of the Executive Committee of the Trust Division of the New York Banker's Association. He is also a director of the Central New York Community Foundation.

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