The U.S. Government is putting the largest 19 banks in the U.S. under a stress test to assess how much capital they may need to survive this recession. They have 2 scenarios: one, a baseline scenario, based on consensus forecasts and a second "more adverse" scenario. The baseline forecast has GDP declining by 2.0% in 2009 and rising by 2.1% in 2010 and has the Unemployment Rate reaching 8.4% in 2009 and 8.8% in 2010. The more adverse scenario has GPD declining by 3.3% in 2009 and rising by 0.5% in 2010 and has the Unemployment Rate at 8.9% in 2009 and 10.3% in 2010.
So far GDP and the Unemployment Rate are far worse than their "more adverse" scenario. GDP for 4th Quarter 2008 was at -6.2%. According to "The Employment Situation" for February 2009, released today by the U.S. Department of Labor, seasonally adjusted, the Unemployment Rate for February hit 8.1% and without seasonal adjustments it was 8.9%. At the current pace, the unemployment rate would hit 10.3% by August 2009. Since 1948, the unemployment rate has never risen by more than .5% in a 12 month span without entering into a recession. The unemployment rate is now up 3.3 percentage points in the last twelve months and is up 3.7 percentage points from its recent low of 4.4%.
Nonfarm payrolls decreased by 651,000 in February, 655,000 in January and 681,000 in December. This month they revised the previous two months of January and December downward by 265,000 jobs. In January they revised downward the amount of jobs lost in the previous two months by 66,000 jobs. In December they made a downward revision of 154,000. In November, they made a downward revision of 199,000. Last month, the total jobs lost from December 2007 to January 2009 was reported to be 3,572,000 jobs. This month, with the revisions, the total jobs lost from December 2007 to February 2009 has reached 4,384,000 jobs. The average recession since World War II has had a loss of 1,917,000 jobs on average. The biggest loss before this recession came in 1982 with 2,838,000 jobs lost. In terms of job loss, we are in the biggest recession since the Great Depression. And the end is not in sight yet.
The U.S. Department of Labor released the Weekly Claims data for Unemployment Insurance yesterday. Initial claims were at 639,000 for the week ending February 28th. This is down from the previous week's number of 670,000. The four week average of initial claims, which is not as volatile, was at 641,750. This is up from the previous week's figure of 639,750.
Continued claims for unemployment insurance increased to 5,106,000 for the week ending February 21st down from the previous week's number of 5,120,000. The four week average for continued claims was also up to 5,011,000 from 4,934,000. This is the highest continued claims has ever been. The previous high was in 1982. Initial claims is faster to move up and signals increases in the unemployment rate. Continued claims take longer to go down than the initial claims once the unemployment rate is elevated. The Unemployment rate doesn't drop until continued claims start to come down.
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