Unemployment On the Verge of a Turnaround

Positive signs are starting to emerge that suggest the labor market is rebounding.  This is of great importance to U.S. recovery mangers and collection professionals.     

The rate of job losses is slowing down. According to the latest employment report released earlier this month, in just nine months the U.S. economy has gone from losing two million jobs a quarter to one-tenth that rate –  a 90% improvement.  This is the fastest improvement since at least the mid-1970s. Layoffs have also fallen back down to pre-recession levels, decreasing by more than 75% from their peak in early 2009.  

Digging past the headlines, we find that first time unemployment insurance claims actually increased by 36,000 to 482,000 in the week ending January 16, rather than the expected drop of 4,000.  This increase is inconsistent with positive jobs growth and, on the surface, may be concerning for ARM professionals because one of the biggest challenges of a recovering economy is increased jobs.  Some speculate that the rise in claims in January is due to a processing backlog during the holidays and budget strains on state and local governments, which make sense.

I don’t think we are out of the woods yet.  While job loss totals have tapered off from the worst points of this recession early last year, the unemployment rate remains at 10 percent and increases in first time claims may cause this rate to increase.   The ARM industry really needs to see two consecutive quarters of flat unemployment for recovery managers and collection professions to be in a position to accurately and consistently forecast improvements in their liquidation results.  A drop would be even better.