Trader’s Narrative

Today’s Labor Department data for June’s non-farm payrolls was -467,000. That surprised many since consensus was -350,000. That should put the kibosh on any ‘green shoots’ talk for now. Especially since the losses were not only deep but across the board for every industry.

This brings us to total cumulative job losses of 9 million in this recession (so far!). That’s much more than the historical average in previous cycles.

Not surprisingly, the stock market took a nose dive on the news but you could argue that it has been acting the way it has for the past two months, meandering with no real direction.

This chart compares the most recent recession’s job losses to the previous cycle as well as the over all post World War II average:

Source: Chart of the Day

As the chart clearly shows, this is much more than a run of the mill recession. We’re seeing about 3 times more job losses than in the past. Had this been a ‘normal’ cycle, we would have seen a trough in April 2009.

And even more troubling, we’re seeing signs of wage deflation. Average weekly earnings fell 0.3% in June. On an annual basis, that’s equivalent to about -1.6% compared to +1.8% last year (and +5.2% in 2007).

Here’s another chart showing more granular data for past recessions:

Source: Calculated Risk

The only post World War II recession which had deeper job losses was in 1948. But we are fast approaching that record. On the plus side, the recovery back then was just as sharp.