With the November’s jobless numbers right around the corner (being released this Friday), and likely to play a large role in where our markets go for the rest of the year we are predicting job losses of 117,000 jobs lost over the course of the month.  This is a relatively bullish prediction but is supported strongly by the surprisingly good weekly jobless claims that have recently been coming in.  In fact, those weekly jobless claims were how we came to the number 117,000.  Below is a graph comparing the average of the month’s four/five weekly jobless claims with its monthly jobless claims and developing an exponential trend-line (we realized this is a more accurate trend-line than linear after last month’s underestimation of the actual number of jobs lost.

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The stock market keeps going up.  Its now about to hit 10,500 for the first time since early September 2008.  As we continue the V-shaped recovery, there is one thing thats missing: JOBS.  We’ve discussed how the only reason people still aren’t hiring is because they lack any faith in the future of the economy.  Today, the Gallup tracker of whether the public believes the economy is “getting better” hit a 4 and a half month low, reaching just 31 percent saying its getting better.  At the same time, the Dow Jones hit another 52 week high and just keeps on going with good fundamentals driving it on.  So where’s the disparity? It all started 3 months into the recovery in mid-June when the stock market had flattened for about a month.  (Below is a graph of the increase in the percent of people not saying the economy is poor [green] compared to the increase in the Dow Jones [brown]):

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We are exactly 8 months in from the Dow bottom that everyone now refers to as the economic nadir of this recession and things are more convoluted than ever before, due to the worsening job situation. Today, we are building on our last look half a year into the recovery in the month of October, to give you a more time-pertinent look at the state of the economy.  The economy has truly reached a critical juncture, where the question is will the indicators flat-line and stop the robust recovery, or will they continue to improve and give us a very strong, quick recovery.  To answer this, the key questions must first be answered, how is the recovery holding up, will it continue, will it be jobless, and will it be widespread.

NOTE: Click on the graph to see a larger picture.

1. How is the recovery holding up? Even though the net change in payrolls continues to improve, and the Dow continues to increase, it is clear that the rate at which both of these indicators are increasing has slowed.  The Dow saw a down month in October, and is only up since 10/09/09 because of the strong week that just passed.  Meanwhile, other indicators are showing substantial weakening in the face of increasing impatience as consumers wait for true recovery.

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Once again, Fiscal Frenzy is predicting a number far more bullish than the consensus estimate as we are attacking October’s job loss number, the number due to come out early tomorrow morning.  Fiscal Frenzy predicted last week a 3.5 percent GDP increase, exactly the same amount we actually saw, for the third Fiscal Quarter (and higher than the consensus estimate of 3.2 percent).  We are using this week to predict tomorrow’s payroll increase, predicting that it will be far better than the consensus estimate of 175,000 jobs lost.  Once again a picture is worth a thousand words, and using the graph below comparing the average weekly job claims for the month to the month’s payroll increase, we drew an exponential and a linear trend line.  Upon averaging the predictions of the two based on October’s weekly jobless claims, we came up with our estimate of 160,000 jobs lost over the course of October.

Note: The data used is only from February to September, and was all collected from the US Department of Labor Site.