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By Brett Horn, CFA | 06-10-2009 05:08 AM

Unemployment: How High Will It Climb?

Morningstar employment sector analyst Vishnu Lekraj forecasts unemployment ticking higher still but sees an inflection point in the pace of job losses.

Brett Horn: Hello, I'm Brett Horn, associate director of equity research here at Morningstar. We got the latest employment report from the government on Friday [June 5]. I've invited Vishnu Lekraj, our analyst who covers the employment sector here, to talk about it. So, just start from the start. What were the headline numbers, and what's your take?

Vishnu Lekraj: We lost over 300,000 jobs over the month of May. We also saw unemployment here reach 9.4% over the month of May. What happened was we saw some encouraging news, we saw some lessening in the pace of losses in jobs. We also saw the indicators I look for in terms of temporary employment and the three-month moving average of non-farm jobs, we saw both of those numbers stabilize, and actually show some encouraging points or points going forward that we can see some improvement here over the next year or so.

What was a little different about this report is that we saw mixed results in regards to two headline numbers. The loss of non-farm jobs we saw become significantly less than what economists were expecting through their consensus. We saw the unemployment rate here reach above consensus. So we saw two divergent views. The payroll number again was significantly less than what we expected, or what economists expected, but again all in all, I think the takeaway here was that we saw a further stabilization, we saw a good base for some improvement. Again, let me stress, we did see continued job losses.Read Full Transcript

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