Rate cuts are back on the table in Australia after the economy shed 5.5K jobs in December vs. expectations of a gain of 4.5K. It's the first negative print since August. All of the losses were in full-time employment, which lost 13.8K jobs, and the unemployment rate ticked up to 5.4%. The aussie is ... Morningstar employment sector analyst Vishnu Lekraj forecasts unemployment ticking higher still but sees an inflection point in the pace of job losses.<br/><br/><b>[0:00:09]</b> ... associate director of equity research here at Morningstar. We got the latest <b>employment</b> report from the government on Friday [June 5]. I've invited Vishnu Lekraj, our analyst who covers the <b>employment</b> 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 <b>jobs</b> over the month of May. We also saw <b>unemployment</b> 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 <b>jobs</b>. We also saw the indicators I look for in terms of temporary <b>employment</b> and the three-month moving average of non-farm <b>jobs</b>, 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 <b>jobs</b> we saw become significantly less than what economists were expecting through their consensus. We saw the <b>unemployment</b> 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. Horn : All right, going back to the point you made, though, if the number of <b>jobs</b> lost was less than consensus, how can the <b>unemployment</b> rate be higher than consensus? Lekraj : That's a good question. The reason for that is both data points are from two different surveys. The government puts out both of these data points all in one time, but they are done through two different methods. The non-farm <b>jobs</b> are measured by taking a sample of payrolls from different business, and the <b>unemployment</b> rate is determined by taking a sample of households. So from that standpoint, you can get two different results, just because they are two different surveys. Two other points, though, that could be interesting and may have affected both numbers was that with the non-farm <b>jobs</b> it's hard for the government to survey new <b>jobs</b> you get from new business starts. It takes time for those payrolls to hit the tax books. So the government has to make an estimate, and they make it based upon a model. This model tends to maybe add or subtract <b>jobs</b> based on what it says for the month. This month there was especially a large amount of <b>jobs</b> added to that number for the non-farm <b>jobs</b>. So that might have helped it above consensus. Horn : OK. So it seems like models like that, they can be relatively reliable, when you have a constant state, but a lot of times that might give you weird results at the turns. Is that fair to say? Lekraj : Exactly. The <b>unemployment</b> rate itself, sometimes what happens is that the workers, when they get laid off, they look for work, and they can't find work, so they get discouraged and leave the job force or the labor force. The government doesn't count them at all in their results. But sometimes these folks see some green shoots, should we say, some lingo being thrown around. Or they see some encouraging job prospects and they come back into the labor force. They haven't quite found a job, but they are still looking for <b>jobs</b>, and the government counts them as being unemployed. Horn : Now, for the last few months, there's been a lot of debate, is <b>unemployment</b> going over 10% or 9.4%. Lekraj : Right. Horn : Is there any question of it going over 10%, or do you think that's still possible that we might be stable at 10%? Lekraj : In my mind, no question it's going over 10%. From the data I've been looking at, that's where it is going to go. My range was 9.5% to 10%, a little over that is what I was looking at. I actually wrote a Stock Strategist in February, " Five Picks for a Dour <b>Employment</b> Market " that outlined the data I was looking at, detailed where it might end up. So with it going over 10%, it's no surprise to us here at Morningstar. Horn : So we now think the <b>unemployment</b> rate will be worse than we thought a while back, but we're also seeing some signs it may be better numbers. Have we reached a turning point? What's your thought on that? Lekraj : I think we have. The key phrase is the inflection point. Not necessarily a huge turning point, but we've seen the loss--the pace of loss is stabilized. We've seen the amount of <b>jobs</b> that we're losing obviously lessened per month, <b>unemployment</b> here slow a little bit. I guess the key is inflection, have we reached an inflection point. That does not mean we're going to see a huge amount of job increases over the next year, but we will see job losses that are going to taper off. Hopefully, eventually, the second half of 2010, maybe a little bit before, we can see some improvement. Horn : Now, historically, has that been a good predictor, when you see the turn in the absolute number of <b>jobs</b> lost? Is that a good predictor of coming out of a recession? Is that a sign that maybe the recession is over? Historically, how has that worked out? Lekraj : Definitely. The folks who go ahead and officially put on recession bars, or the ranges of when the recessions took place, they tend to look at the non-farm <b>jobs</b> number as a key indicator as to when we are going to get out of the recession and when the <b>employment</b> market will improve. When you look historically at that number, when it bottoms--the three-month moving average especially--when that bottoms, we've reached a ... <br/> Recent jobs data hold hopeful signs, but the unemployment rate will creep higher for a while.<br/><br/><b>[0:00:05]</b> ... Jason Stipp : I'm Jason Stipp from Morningstar. Since the October <b>unemployment</b> rate crept up to 10.2%, we've seen some signs of glimmers of hope in the market for <b>employment</b> since then. Here with me to talk about what that could mean for tomorrow's government <b>employment</b> report and <b>unemployment</b> data is Morningstar's Bob Johnson--he's associate director of economic analysis--and Vishnu Lekraj--he's an equity analyst covering the <b>employment</b> sector. Thanks for joining me, guys. Bob Johnson : Thank you. Stipp : So first question for you, we have seen some signs of hope, some glimmers of hope, some more positive <b>employment</b> data since we saw the last government <b>employment</b> report. So what have you been looking at and what has that been telling you? Johnson : Well, we've got actually a lot of pretty good news here. The initial <b>unemployment</b> claims, which is one of my very favorite indicators, has shown some huge improvements. Now a lot of that's been in the last two weeks of data so it won't be in the <b>jobs</b> report, which ends in mid-November. So those aren't fully captured yet, but initial claims have been getting continually better and have frankly ... <br/><b>[0:02:03]</b> ... the payroll processors looking at the numbers. They saw about 30,000 less <b>jobs</b> in the prior month. And so if we did a similar exercise, we'd see some improvement in the federal numbers on Friday. ... <br/><b>[0:02:44]</b> ... January. And in a good economy, you're probably gaining 100,000 to 200,000 <b>jobs</b> a month. So that gives you some idea of how far we really have come here. And so I think I'm looking ... <br/><b>[0:03:41]</b> ... how well these guys may do over the holiday season. Also, temporary <b>employment</b> has been a very bright spot over the past couple months, actually over the past quarter really. The government revised some numbers ... <br/> *** enter disclosure *** The divergence between the reality easily observed in the real world and the heavily touted hype that "the recession is over because GDP rose 3.5%" is growing. It's obvious that another 7 million jobs which are currently hanging by threads will be slashed in the next year or two. According to the ... A preponderance of evidence points to a job market that's healthier than Friday's report implies.<br/><br/><b>[0:00:05]</b> ... Jason Stipp : I'm Jason Stipp for Morningstar. We got a decidedly mixed <b>employment</b> report from the government for January. We only added 36,000 <b>jobs</b> to the economy, but the <b>unemployment</b> rate did drop down to 9%. Here with me to dig into the numbers and what might have affected them is Morningstar's Bob Johnson. He is director of economic analysis, and Vishnu Lekraj, he's an equity analyst covering the <b>employment</b> sector. Thanks for joining me, guys. Vishnu Lekraj : Thank you. Bob Johnson : Thank you. Stipp : So, this is the second, somewhat disappointing <b>employment</b> report that we got in a row, because December also was disappointing. We only saw 36,000 <b>jobs</b> added from that establishment survey portion of the report. What do you think was behind that disappointing number? There are several factors ... <br/><b>[0:01:08]</b> ... those activities if there is bad weather, and you tend to lose <b>employment</b> there, and that's absolutely what showed up in the number. We had bad losses in construction, in couriers and in temporary help, ... <br/><b>[0:01:43]</b> ... the economy. I know today Manpower CEO was there saying that the <b>employment</b> market as a whole was on upswing. When you look at the categories this month, there was little growth in most of ... <br/><b>[0:03:20]</b> ... start up and the adjustment is huge. They actually take about 400,000 <b>jobs</b> off the job report in January for this factor, because so many new businesses are started in January. So, that hurt the ... <br/> By David Fry ( ETF Digest ): VJ Day, Honolulu Hawaii, August 14, 1945 from Richard Sullivan on Vimeo . Out of the gate this morning was the whopping surprise in the monthly employment report (146K jobs added vs. 85K expected and prior 171K) and the unemployment rate dropped (7.7% vs. 8% expected ... *** enter disclosure *** The employment picture holds steady in February despite bad weather, and several signs are building for continued improvement.<br/><br/><b>[0:00:05]</b> ... Jason Stipp : I'm Jason Stipp with Morningstar. The government released its <b>employment</b> report this morning, and despite worries about weather wreaking havoc with numbers, the <b>employment</b> situation was holding pretty steady. About 36,000 <b>jobs</b> were lost, and the <b>unemployment</b> rate held steady at 9.7%. Here with me to dig into the numbers is Morningstar's Bob Johnson, he's associate director of economic analysis. And Vishnu Lekraj, he's an <b>employment</b> sector analyst for Morningstar.com. Thanks for joining me, guys. Vishnu Lekraj : Thank you. Bob Johnson : Great to be here. Stipp ... <br/><b>[0:01:54]</b> ... of the key things to look at. I'm excited about the 9.7% <b>unemployment</b> rate. That's certainly a number that factors into a lot of budget calculations. Most people had been thinking that number would be more like 10%. The lower that number stays, the more it helps the deficit. So, I'm pleased to see that number come in low as well. Stipp : It's really construction then that's hold us back, would you say? If we're seeing growth in other areas, that's really still the drag on the overall picture. Johnson : Correct. We lost 60,000 <b>jobs</b> in construction last month, again, and some of that was probably weather-related. But nevertheless, that is the one sector that's still having ... <br/><b>[0:03:16]</b> ... down, which is also a good sign. Bob was right with the <b>unemployment</b> rate holding steady. But when you look at the U6, or the shadow rate, that went up. And what that means is ... <br/><b>[0:05:18]</b> ... is really kind of the most exciting. Everybody was focusing on the <b>jobs</b> number; it was the least important number this week. I was very excited about the consumption numbers we saw on Monday. Up ... <br/> HSBC ( HBC ) adds to its cost-cutting drive, with the latest move set to cost 1,149 U.K. jobs (total U.K. employment is 47K). These cuts will mostly come from wealth management. CEO Stuart Gulliver has slashed about 34.5K from the global payroll since taking over in early 2011. Post your comment!