The labor department estimates that July layoffs were the least since August of 2008. The chart below, provided by the New York Times, provides a clear picture of how the economy is slowly pulling itself out of the worst recession in over fifty years.
Certainly the rate of fall in the number of layoffs has not been smooth—it never is. But the trend is clear. Earlier projection of a bottoming in the third or forth quarter of this year are still looking accurate.
Fewer layoffs also resulted in a slight drop in the rate of unemployment. The chart below shows this:
It should be pointed out that much of the drop in the rate of unemployment was a result of 400,000 workers leaving the labor market. This “discourage worker” effect is well known in economic circles. When job get harder to find, many workers become so discouraged that they cease actively looking for work. It happens in every recession, and the effects are reversed when the labor market improves with recovery.
Another effect of discouraged workers is that while it cushions the rate of unemployment during the downturn, it is a drag on unemployment rates during the recovery. As jobs become easier to find, many of those who left the labor market because of their discouragement, re-enter the market when things get better. A higher participation rate of the labor force thus causes the unemployment rate to rise, or fall less, when things get better.
All in all, this is good news. The economy does appear to be bottoming. I guess that by October on November, the fall in GDP will reach zero, and there should be some recovery in December or January of 2010.
