U.S. jobs recession coming rapidly
PRINCETON, NJ -- Gallup's Net New Hiring Activity measure shows that U.S. employees' perceptions of the job situation at their companies worsened significantly in October, with the downward trend continuing to accelerate, as it has over the past three months.
Jobs Crisis Is Getting Worse
The economic honeymoon for President-elect Obama may have ended on Election Day, with Wall Street plunging on Wednesday as ADP Employer Services reported that the private sector lost 157,000 jobs in October. Similarly, Challenger, Gray, & Christmas announced that job cuts jumped 79% among U.S. employers in October compared to a year ago. These reports and the sharp drop in retail sales reported on Thursday left the markets little time to celebrate Tuesday's historic presidential election and instead have turned attention back to jobs and the fundamentals of the economy.
Gallup's Net New Hiring Activity measure, based on interviews with more than 9,000 employees in October, suggests the deterioration in the job market is accelerating. The percentage of employees saying their companies are hiring fell to 30% last month, the lowest level of the year, while the percentage saying their companies are letting people go increased to 19.6% -- the highest of the year. As a result, Net New Hiring Activity fell to 10.4 -- a 33% drop from September and a 60% decline from last January.
In turn, this suggests that the number of jobs not only declined again in October for the 10th consecutive month, but probably did so by substantially more than the 200,000 jobs generally expected. And while a number of variables make it hard to predict exactly what job numbers the Bureau of Labor Statistics will report on Friday morning, these Gallup job findings suggest the "real" unemployment rate is getting worse at an accelerating rate and should surge past last month's 6.1% rate.
Net New Hiring Activity by Region
Net new hiring activity fell in all regions in October, with the sharpest declines taking place in the South and West, but the East and Midwest also had substantial declines. Overall, current job-market perceptions are now worst in the West and best in the South -- but perceptions are weak in all regions.
Over the last two months, Gallup's Net New Hiring Activity measure began to pick up more of the jobs fallout from the financial crisis, but it is not clear that the impact of the current debacle has been fully realized. Perceptions of job-market conditions in the East are still better than those in the West and not much different from those in the Midwest.
Net new hiring activity fell the least in the Midwest during October. However, job perceptions remain weak in this region and, given the slowing of overseas economies, it seems likely that Midwest job-market conditions will continue to deteriorate in the months ahead.
Net new hiring activity also continued to decline in the South in October. Even after its declines in net new hiring activity over the past several months, the South continues to have the best job-market perceptions of any region.
Net new hiring activity plunged in the West in October. Job-market perceptions in the West are now worse than they are in any other region of the country.
Election and Consumer Spending
The end of the presidential election and the naming of President-elect Obama's new economic leadership team may have a positive impact on overall consumer confidence. As is the case with a losing football team, merely replacing the coach can give everyone a new start and inspire new confidence. Further, Gallup's economic confidence measures have shown a marginal decrease in consumer pessimism over the past couple of weeks as Election Day approached.
However, Gallup's Net New Hiring Activity measure suggests that the U.S. economy is heading into a significant and somewhat traditional jobs-led recession. In turn, this implies that Obama may encounter something similar to the 1980-82 experience of former President Reagan. As was the case more than a quarter of a century ago, the new president enters office with enormous economic challenges.
A recent pre-election Gallup Poll showed that less than half of the American public thought either presidential candidate could provide the economic leadership needed to get the economy moving in the right direction anytime soon. Given the many factors that were slowing the economy prior to the recent financial crisis -- and the severity of the fallout associated with that crisis -- it will take a lot for the new president and Congress to successfully change that perception and rebuild confidence in the nation's economic policy team.
Gallup's Net New Hiring Activity measure was initiated in January 2008. It is an effort to assess U.S. job creation or elimination based on the self-reports of more than 8,000 individual employees each month about hiring and firing activity at their workplaces. In order to calculate this measure, Gallup asks current full-time employees whether their employers are hiring new people and expanding the size of their workforces, not changing the size of their workforces, or letting people go and reducing the size of their workforces. Net new hiring activity is computed by subtracting the "letting go and reducing" percentage from the "hiring and expanding" percentage. The assumption is that employees across the country have a good feel for what's happening in their companies, and that these insider perceptions can yield a useful summary indication of the nation's job situation.
Gallup is interviewing no fewer than 1,000 U.S. adults nationwide each day during 2008. The economic questions analyzed in this report are asked of a random half-sample of respondents each day. The results reported here are based on combined data of more than 8,000 interviews in January, February, March, April, May, June, July, August, September, and October. For results based on this sample, the maximum margin of sampling error is ±1 percentage point.
Interviews are conducted with respondents on land-line telephones (for respondents with a land-line telephone) and cellular phones (for respondents who are cell-phone only).
In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.