Reality check on the job front
The American economy suffered the net loss of 125,000 jobs in June, largely matching forecasting economists’ expectations. The loss was totally tied to the termination of 225,000 temporary Census jobs.
Private businesses-the more critical component of U.S. employment reports as Census hiring & layoffs muddy the job picture during 2010’s first three quarters-added 83,000 jobs during June. The gain, while more than twice the revised 33,000 gain in May, was still less than the 100,000 gain widely expected. Better news saw overall job gains for April and May revised to show 25,000 more jobs.
The fact that an additional 339,000 temporary Census job “losses” will negatively impact payroll totals over the next few months suggest that July and August reports will be lackluster as well, at least as far as the headline number is concerned.
The nation’s unemployment rate surprisingly declined to a 12-month low of 9.5 percent in June, down from May’s 9.7 percent rate. The decline, however, occurred for the wrong reason…discouraged people leaving the labor force in droves, rendering them no longer counted as unemployed.
The weak nature of the employment report combines with a volatile stock market and other signs of slowing U.S. economic performance in recent weeks. Such weakness has emboldened more bearish prognosticators of the economy to more firmly embrace the double-dip recession view. We will maintain our view of a 2.2 percent to 3 percent real (after inflation) annual growth pace of the U.S. economy for 2010.
We didn’t jump on the much more optimistic “growth bandwagon” earlier this year when employment gains and other economic data were more impressive. We won’t jump on the “woe is me bandwagon” now, although many economic growth forecasts will move down toward the 1.5 percent to 2.5 percent level, or less. And note: the chance of a double-dip has risen.
The goods producing sector of the American economy saw employment decline by 8,000 jobs in June. The construction sector lost another 22,000 jobs during the month, in part tied to the end of government financial incentives for homebuyers.
The nation’s manufacturing sector added an estimated 9,000 net new jobs in June, although it was the smallest gain of the year. The mining & logging sector added 5,000 net new jobs.
The nation’s much larger service providing sector added 91,000 jobs during June, with the addition of 46,000 net new jobs in professional & business services. The leisure & hospitality sector added 37,000 jobs during the month, while the education & health services sector added 22,000 net new jobs. The transportation & warehousing sector added 15,000 positions, while retail sales employment fell by 7,000 jobs.
Overall government employment fell by 208,000 positions, again led by the loss of 225,000 Census jobs. In addition, the loss of 10,000 jobs in the financially strapped state & local sector partially offset government job gains apart from the Census.
Down to 9.5 percent
It would be great if we could talk of a declining unemployment (jobless) rate associated with strong job gains…didn’t happen. As noted, the U.S. unemployment rate did decline to 9.5 percent in June from May’s 9.7 percent rate because another 652,000 people left the labor force…hence they are no longer counted as unemployed.
The estimated 652,000 labor force decline in June, combined with the 322,000 decline in May, shows nearly a million people giving up on a job search over the past two months. This contrasts sharply with a labor force rise of more than 1.6 million people during 2010’s first four months, when economic optimism was more solidly entrenched in the economy. Many of these people who stopped looking for jobs in more recent months did so because their unemployment benefits have or soon will stop arriving in the mail.
Note: One must be looking for a job to draw unemployment benefits. Others have left the labor force because of genuine and real despair about finding gainful employment in their communities. Ironically, we could see additional slight declines in the nation’s unemployment rate in coming months because of greater pessimism about job availability — hence more people leaving the labor force.
We could also see a rising unemployment rate in coming months if optimism regains ground, with hundreds of thousands of people re-entering the labor force.