Schunk releases monthly comprehensive economic analysis
Highlights from May 2009 data:
* South Carolina's unemployment rate surged to 12.1% in May from 11.4% in April. South Carolina's unemployment rate has blown past the levels seen during the early 1980s. There are currently 266,200 South Carolinians officially considered unemployed.
As bad as these numbers are, the story doesn't stop there. Economists have several alternative measures of unemployment, or more specifically, of "labor underutilization." The official number (referred to technically as U-3), now at 12.1% in S.C., is an estimate of the fraction of all those either working or actively looking for work who are currently out of work. We have another indicator (known as U-6) that also includes people marginally attached to the labor force (such as discouraged workers -- those who have given up looking for work) as well as people working part-time for involuntary reasons.
Based on recent trends in this measure for South Carolina in recent years, I estimate that this broader measure of unemployment is roughly 19.9% in South Carolina, and is currently 16.4% for the U.S. (The U.S. number is from the U.S. Bureau of Labor Statistics, the S.C. number is my own estimate. More information on these alternative measures can be found at: http://www.bls.gov/lau/stalt.htm.)
* Total employment in South Carolina is down 4.6% over the last 12 months. Through May, employment year-to-date in South Carolina is down 4.5% from 2008. Losses continue to be very widespread across sectors, with manufacturing down 29,000 jobs since last May; leisure and hospitality down 15,400; professional and business services down 14,900; trade, transportation and utilities down 14,000; and construction down 10,100. The pain of this recession has been widespread across the economy.
* For the Grand Strand, both Horry and Georgetown's unemployment rates rose in May. More problematic, unemployment usually posts a decline along the Grand Strand in May as we head into the summer season. The increases in May this year suggest that the local economy continues to deteriorate quite sharply.
The major economic indicators have been mixed in recent weeks. Some are showing signs that economic deterioration is moderating (the U.S. Index of Leading Indicators posted its second consecutive monthly gain in May, as did the number of U.S. Single-Family Building Permits), while other indicators point to continued weakness (U.S. Industrial Production fell 1.1% in May and weekly U.S. Initial Jobless Claims remain above 600,000). Overall, the available indicators continue to point to an economy that remains in recession, but with a bottom looming in the third quarter.
However, I continue to expect that the recovery that should begin at the end of this year will be anemic. My current forecast call for U.S. Real GDP to grow by just 0.6 % in 2010. While positive, that growth would be insufficient to generate substantial labor market improvement. As in previous months, I'll point out a few key headwinds for the state's labor markets: high inventories of residential properties and commercial space will inhibit job growth in construction, tax revenue weakness will inhibit job growth in state and local government, low levels of consumer spending will inhibit job growth in retail and leisure and hospitality even after consumer spending begins to revive.
The key factor working against the economy moving forward will be sluggish consumer spending. Currently, U.S. households are in the midst of: replenishing savings, paying off debt, and reducing the amount of new debt, and they are trying to accomplish this while: the official unemployment rate stands at 12.1% (in S.C.), a broader measure of unemployment may be as high as 19.9% (in S.C.), and now throw rising gas prices into the mix. Taken together, these factors suggest that consumer spending in the coming recovery will be relatively weak -- and when consumer spending is roughly 70% of the overall economy, this translates into slow economic growth.
For all of 2009, I expect job losses in South Carolina to total 4.2%, and I expect the state's unemployment rate to average 12.8% for the whole year as it continues to rise before reaching 15% early next year.
For additional information, contact: Don Schunk, Research Economist, firstname.lastname@example.org, 843-655-0995 or 843-349-2485.