Today, the latest jobs report showed that the US economy created just 18000 jobs in June 2011. The numbers for May 2011 were revised downward to 25000 jobs from 54000. Taken together in context of the larger picture, we are seeing clear evidence of a trend change in the job market. For all we know, the next leg down may have already started but confirmation won't come until August 2011 at the earliest.
The job market is clearly sliding down the "Slope of Hope" in terms of the larger picture. During June 2011, President Obama downplayed the weak job numbers, attributing it to a "bump in the road". After the ADP report came out last Wednesday, economists and analysts boosted their expectations from 90000 to 175000 in terms of jobs created in June 2011 and then predicted that hiring would accelerate in the second half of 2011. After the job numbers for June 2011 came out, Obama again attributed the weak numbers as a "bump in the road" and started to blame the debt ceiling showdown, while at the same time, expressed optimism that hiring will accelerate in the next few months. The latest speech is here.
The next leg down in the job market is imminent if it hasn't started already. Earlier, we saw the beginning of the next leg down in the DJIA. The job market is now following suit. Once the next leg down starts, the (United States) economy will wipe out 36 million jobs in the next 5 years. The mechanism is already in place for mass job losses to take place, namely, the fact that businesses and corporations are leveraged to the hilt with credit and debt and rising interest rates will trigger a massive cascade of debt defaults as the existing debt burden becomes too heavy to bear. Even professions that are deemed to be hot (such as health care) will sustain massive job losses as their businesses fold.
Expect Obama to continue to play the "bump in the road" card for a number of months as the job market resumes its decline, and expect the GOP to get more aggressive in their attacks over time. Both Rep. John Boehner and Rep. Eric Cantor wasted no time using the latest job report to attack Obama's economic policies.
The unemployment rate (U6) is at 16.7% and will soon surpass the highs seen in 2009 (17.5%). The unemployment rate (U6) is projected to rise to 40% by early 2016. Expect weekly jobless claims to surpass the highs seen in 2009, possibly reaching 900,000 or more by early 2016.