Employment growth foreseen by midyear

Employment growth foreseen by midyear Employment is one of the most closely watched economic reports because it covers all sectors of the economy.

During this time of economic transition out of recession, it is even more closely watched to provide evidence for when the consumer sector, which makes up about two-thirds of gross domestic product, will begin to increase again, resulting in more spending influence to the economy.

Friday's report from the U.S. Labor Department provided signs of improvement but no growth yet.

Employment fell by 190,000 in the nation in October, and the unemployment rate inched up to 10.2 percent, the highest since 1983.

The job losses are an improvement from the average decline of 645,000 that occurred each month from November 2008 through April 2009, when financial institutions were laying off and consumers were dramatically pulling back on spending.

Similar improvements are evident in the state, although the latest numbers are only through September.

Employment in Virginia fell 15,400 on a seasonally adjusted basis in September, with 3,300 of the jobs lost in the Northern Virginia metro area followed by 2,300 in the Richmond area and 1,900 in the Charlottesville area.

The intensity of job loss in Virginia was greatest in November and December 2008, with an average decline of 21,000 in each of those months.

The Richmond area saw its strongest contraction in October and November 2008 and in February 2009 with an average monthly loss of 7,000 when Circuit City, LandAmerica and Qimonda were closing operations.

The unemployment rate in the state suggests Virginians should be feeling better about job security, which could translate into better retail sales this holiday selling season when compared to the nation.

The unemployment rate peaked in the state at 7.1 percent on a seasonally adjusted basis in June and has since fallen to 6.7 percent in September, compared with a rate that continued to climb in the nation, according to the Bureau of Labor Statistics. (October's results will come out later this month.)

In the Richmond area, the unemployment rate on a seasonally adjusted basis peaked at 8.5 percent in May and has since dropped to 7.5 percent, according to analysis by Chmura Economics & Analytics.

Looking to 2010, we are forecasting employment to start growing by midyear as private-sector businesses start to see a firm demand for their products and services.

Even though this will lead to increased retail sales and corporate taxes, next year will be a challenge for Gov.-elect Bob McDonnell as stimulus funds most likely dry up in the big-ticket programs of K-12 education and Medicaid.

Fortunately, our new governor won't have to start setting aside revenue into the rainy-day fund to prepare for the next recession until fiscal year 2014.

Christine Chmura is president and chief economist at Chmura Economics & Analytics. She can be reached at (804) 649-3640 or .