Mark Serlin of Economic Strategies Prepares for the June Employment Report
Tuesday, July 01, 2008PAUL KANGAS: While surging oil prices have grabbed much of Wall Street's attention, investors are also awaiting the release of the June employment report on Thursday. Joining us now to talk more about that report and what it could signal about the health of the economy is Mark Serlin, chief economist at the forecasting firm Economic Strategies. Mark, welcome back to NIGHTLY BUSINESS REPORT.
MARK SERLIN, CHIEF ECONOMIST, ECONOMIC STRATEGIES: Thank you, Paul
KANGAS: There's been much gnashing of teeth about whether our economy is in recession. What are you seeing?
SERLIN: So far we've avoided a recession in the sense of negative quarters of GDP growth. In fact, my forecast for Q2 GDP is for a 1.5 increase, possibly even 2 percent. However, we got data today on construction spending that show Q4 GDP could be revised from up 0.6 percent possibly into negative territory. If Q4 is revised to negative GDP, a lot of people who have been calling for a recession are going to be seeing it being proven correct, but there's a lot of data that go into those GDP revisions. Today's construction spending number was only one small part.
KANGAS: Let's talk about the payroll data, 324,000 non-farms job have been lost since the beginning of the year. I know you brought along a chart comparing the current down cycle with the recession of 2001. What is this telling us?
SERLIN: So far just like we've avoided a negative GDP quarter, we've also avoided the job declines that tend to be about 200,000 jobs to 300,000 jobs that we usually see in a recession. So far the largest decline we've gotten this cycle I think is 88,000. So, so far the employment losses have been relatively small.
KANGAS: OK, now given that, where do you see June payrolls coming in?
SERLIN: A lot of the high frequency data have deteriorated recently so my forecast would be at the lower end of the recent range, which would put us at a decline of about 90,000. But there too, that's still much, much better than the 200,000 job loss to 300,000 job losses you usually see in a recession.
KANGAS: There were a lot of questions Mark about the May unemployment rate which surged to 5.5 percent. That was the biggest monthly increase in 22 years. Now I understand you have a chart that's showing the role that teens in the job market played in that surge.
SERLIN: Right. Every month teenagers have the potential to cause a lot of volatility in the unemployment rate. Because of that I tend to look at the adult unemployment rate which is for people 25 and older. It also moved up last month. It is turning decisively higher. So while we might see a little volatility in the overall rate due to teenagers, the underlying theme that the unemployment is increasing is still there and we see it with the adult unemployment rate which is the most important part.
KANGAS: Do you see the unemployment rate continuing to rise? We just have 30 seconds.
SERLIN: Overall yeah, we got additional data today from the manufactures that show their employment index hitting a new low for the cycle. So with the ISM employment index setting a new low, continued claims for unemployment insurance setting a new high, everything points toward a deteriorating labor market.
KANGAS: OK, Mark, I want to thank you very much for sharing your insights with us.
SERLIN: Thank you.
KANGAS: My guest, Mark Serlin, chief economist at Economic Strategies. If you would like to learn more about Mark Serlin's economic forecast, you can check out his contribution to our blog. His comments are posted on our website, NIGHTLY BUSINESS REPORT on pbs.org.
