A Mea Culpa on US Unemployment
by Charles Lemos, Fri Jul 02, 2010 at 06:46:55 PM EDT
Yup, the June unemployment numbers are out, the numbers are bleak and it is all my fault. Having attempted to re-enter the world of the employed earlier this year and having found zero reception, I stopped looking for work. The unemployment number dipped in June not because more jobs were added but rather because 652,000 Americans including myself abandoned the labour market this month. That, in a nutshell, is what is going on in the US labour market.
First, an overview from the New York Times:
The United States added just 83,000 private-sector jobs in June, a dishearteningly low number that could add to the growing number of economists who warn that the economic recovery has slowed to the point that it cannot generate enough job growth.
Over all, the nation lost 125,000 jobs, according to the monthly snapshot of the job market released by the Labor Department on Friday. Most of the lost jobs came as temporary workers hired by the federal government for the 2010 Census exited their jobs. The unemployment rate, based on a different survey, declined to 9.5 percent in June from the previous 9.7 percent. This decline came only because the nation’s labor force shrank by 652,000 jobs, as many people stopped looking for work.
Just as last month’s government job report appeared deceptively robust, swollen by 411,000 workers hired by the federal government to help with the Census, so the June report appears deceptively anemic, as the government shed many of those same temporary Census workers.
And signs of strength could be spotted. Although quite weak by historic standards, the 83,000 private-sector jobs created in June more than doubled the count in May. And in the first six months of last year, the nation lost 3.7 million private-sector jobs; during the first six months of this year it gained 590,000. Manufacturing continued a modest revival, as manufacturers added 9,000 jobs after hiring 32,000 in May. Amusement, gambling and recreation businesses added 28,000, as one might expect coming into the summer.
The unemployment rate declined two tenths of one percent not because more jobs were added but rather because people stopped beating their heads against the wall and stopped looking for work. Just for the record adding 83,000 jobs falls far short of the number required to just keep running in place. The economy needs about 130,000 to 150,000 jobs just to keep pace with new workers entering the market. Given that over 15 million are unemployed with another 12 million underemployed - technically the category I fall into - the situation is indeed dire. So while the official unemployment rate is now 9.5 percent, the broader U6 rate that includes marginalized workers is 16.5 percent.
Meanwhile we have a White House suffering from delusions of fantasy. Here's Christina Romer, the Chair of Council of Economic Advisors, on the June employment numbers:
Today’s employment report shows continued signs of gradual labor market recovery. Private nonfarm payroll employment increased by 83,000 in June and the unemployment rate fell two-tenths of a percentage point to 9.5%. June marks the sixth month in a row that private sector employment has increased. These continued signs of healing are important, particularly given the recent volatility in world markets and the mixed behavior of other recent economic indicators. However, much stronger job gains are needed to repair the damage caused by the financial crisis and put the millions of unemployed Americans back to work.
Total payroll employment fell 125,000 in June. This decline had been widely anticipated because some of the temporary employment related to the Census began to wind down last month. Temporary Census employment dropped 225,000 in June. Non-Census employment rose 100,000, reflecting a rise in private employment of 83,000 and a rise in other types of Federal employment. Private employment rose at an average monthly rate of 119,000 in the second quarter of 2010, up from 79,000 in the first quarter, and up dramatically from the average decline of 752,000 in the first quarter of 2009. Private employment has increased 593,000 since its low point in December 2009.
Employment gains were spread broadly across industries. The biggest gains were in professional and business services (including an increase of 20,500 in temporary help services), leisure and hospitality, and education and health. Manufacturing also added employment for the sixth month in a row. Besides the decline in Federal employment related to the Census, the industries losing jobs were construction, finance, information, and state and local government. Average weekly hours for all employees on private nonfarm payrolls also declined one-tenth of an hour in June. Hours, however, are still up four-tenths from their low in October 2009.
The unemployment rate fell two-tenths of a percentage point for the second month in a row. At 9.5%, the unemployment rate is now six-tenths of a percentage point below its high last year. However, the drop in the unemployment rate was driven in large part by a substantial decline in the labor force, which we expect to be reversed as employment prospects continue to improve. The household survey also found that the number of workers working part-time for economic reasons declined substantially for the second month in a row. The number of such workers has fallen 525,000 over the past two months.
While this report suggests a continuation of gradual labor market repair, it is important to emphasize the magnitude of the damage that remains from the recession. Payroll employment is still down 7.5 million from its pre-recession peak and the unemployment rate is more than 5 percentage points above its pre-recession low. It is essential that we focus on accelerating job growth. That is why the President continues to work with the Congress to pass targeted jobs measures such as an extension of emergency unemployment insurance, a program for small business lending that will enable small firms to get the credit they need to expand and create jobs, and more aid for troubled state and local governments to prevent layoffs of teachers, firefighters, and police. These are fiscally responsible measures that would have a substantial impact on the rate of job growth.
As always, it is important not to read too much into any one monthly report, positive or negative. The monthly employment and unemployment numbers are volatile and subject to substantial revision. Emphasis should be placed on persistent trends rather than month-to-month fluctuations.
Talk about spin. 650,000 people leave the job market but we are on the right track.
I think it important to note something and to be frank it is necessitous of a longer separate post but the reality is that we have a failed economic model. Beginning with Reagan, the US economic model has favoured the aggrandizement of financial assets over the growth of productive assets. We have an economy that has outsourced its productive capacity so as to allow the titans of capital become evermore wealthy as the American middle class is bludgeoned into the servitude of menial service jobs. And while the ever rightward GOP is largely responsible for this fiasco, the Democrats, especially those in the neo-liberal Clintonite DLC clique are equally complicit in betraying the American worker.
[UPDATE] Berkeley Economics Professor Brad DeLong nails it:
"Getting worse more slowly" is not "better." There is no "upturn." There never was.
Professor DeLong goes on to note that the employment to population ratio, which measures the proportion of the country's working-age population that is employed, is back to 58.5 percent or back to where it was in November 2009. Since climbing to just under 59 percent at the beginning of the year, the employment to population ratio has been sliding downwards the past few months. It stood at 63.3 percent when the Great Recession began in early 2007. The point here is that we are not creating sufficient jobs to keep up with natural population growth. To even get back to pre-recession unemployment rate levels we need a good 400,000 jobs created each month. In other words, we are missing that mark wildly and with each passing month that miss only adds to our woes.