A Mea Culpa on US Unemployment

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.

Payroll Employment
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.

Tags: US Unemployment, US Labor Market (all tags)



RE: A Mea Culpa on US Unemployment

The private sector did add jobs for what, something like the 6th month in a row, so I think that is the right direction. So I wouldn't quite call it spin - but I agree it's not worth much because what good is the right direction if the car is barely moving.

by Nathan Empsall 2010-07-02 06:51PM | 0 recs
RE: A Mea Culpa on US Unemployment

my comment was supposed to be in response to Nathan's first comment, not his second.


the darn page keeps loading when i'm 1/2 through writing the comment and erasing what I wrote.


this thing is buggy (using Firefox, btw)

by jeopardy 2010-07-02 09:08PM | 0 recs
RE: A Mea Culpa on US Unemployment

New deployment just around the corner. Am launching a dozen political sites next week with the new platform, will come back to upgrade this beta version from Jan afterwards.

by Jerome Armstrong 2010-07-02 09:31PM | 1 recs
RE: A Mea Culpa on US Unemployment

BTw, glad to have you posting.

by Nathan Empsall 2010-07-02 06:51PM | 0 recs
RE: A Mea Culpa on US Unemployment

If it is not keeping up with population change, then the jobs situation is actually getting WORSE, not better.

The Administration is spinning, and I don't blame them at all for that. In fact, I really don't want Obama to go out and say "you might as well quit trying to find a job because we are going back into a recession."

But while they need to keep a somewhat rosy face in public statements (not past the point of losing too much credibility, obviously), they need to be seriously looking at policy to fix the worstening situation.

Are they doing that? maybe. I don't know. I hope so.

by jeopardy 2010-07-02 09:04PM | 0 recs
RE: A Mea Culpa on US Unemployment

I think it's more mixed than that. You're right - the economy is absolutely not growing. However, we are not shedding jobs anymore, and while not shedding jobs is hardly the same thing as growing the economy, it's also not the same thing as losing jobs. I do believe we have turned a corner, even if it's not growth. The car is faced in the right direction now, and even if it's in park or even 5mph reverse, that's better than full speed driving the other way. Things have changed.

by Nathan Empsall 2010-07-02 10:22PM | 0 recs
RE: A Mea Culpa on US Unemployment

the population is going up by 200k+ a month.

the population entering the workforce is going up by 130k-150k month.

Thus, we break even on the % of the workforce that has a job if we create 130k-150k jobs a month. Anything less than that and we are losing lobs (as a % of the people available to or trying to work). That's where we are - we are losing jobs compared to the amount of people wanting them.

To make it more clear, if there was no change in the amount of people completely giving up on looking for work, the unemployment rate would actually go up each month that we gain less than 130k-150k job, like this month.

that's why this jobs report is the jobs situation actually getting worse.


An analogy would be inflation. say that your wages are going up by 1% a year, but prices are going up 4% a year. You are not doing better just because your wages are going up; rather, your purchasing power is actually getting worse. It's the same thing with the jobs situation.


by jeopardy 2010-07-02 10:34PM | 1 recs
RE: A Mea Culpa on US Unemployment

From Krugman last December:


"Anyway, I thought it might be useful to create a sort of benchmark for the level of job growth that would really count as good news. I start from the fact that we’ve lost about 8 million jobs since the recession began — that’s the official number plus the preliminary estimate of the coming benchmark revision.

I then take EPI’s estimate that we need to add 127,000 jobs a month. EPI points out that when you put these numbers together, they say that to return to pre-crisis unemployment within two years we’d have to add 580,000 jobs a month.

That’s not going to happen....


But let’s set a more modest goal: return to more or less full employment in 5 years [End of 2015]]–which means seven lean years of depressed employment...

Add in the need to make up lost ground, and we’re at around 18 million jobs over the next five years — or 300,000 a month. So that’s a useful benchmark. Even if we add 300,000 jobs a month, we’re looking at a prolonged period of suffering — a huge cost from the Great Recession. So that’s kind of a minimal definition of success.



since we haven't been doing that int he 7 months since he wrote that, we are actually in a much worse position than that now, and we are actually going the wrong way since we are not even keeping up with population growth, much less making up ground.

by jeopardy 2010-07-02 11:02PM | 1 recs
RE: A Mea Culpa on US Unemployment

Y'know, this almost never happens in blog comments, but you might actually be convincing me.

by Nathan Empsall 2010-07-03 12:53AM | 0 recs
RE: A Mea Culpa on US Unemployment

thanks, but I wish this was a time when somebody else convinced me that I am wrong.


Btw, here's some more:


Dean Baker at CEPR, provides a bleak analysis of these latest bleak numbers in Decline in Labor Force Leads to Drop in Unemployment.

The Labor Department reported that 652,000 people left the labor force in June, causing the unemployment rate to edge down to 9.5 percent, even as the number of employed reportedly dropped by 301,000. …

also showed declines in both the length of the average workweek and the average hourly wage, providing further concerns about labor market weakness going forward …

The employment-to-population (EPOP) ratio fell to 58.5 percent, reversing gains from the prior three months …

The median and average duration of unemployment spells both increased to new records, 25.5 weeks and 35.2 weeks, respectively; although there was a modest decline in the share of long-term unemployed.

The number of discouraged workers was more than 50 percent higher than the June 2009 figure, with the number for men being more than 70 percent higher. …

there are no obvious candidates for improved growth any time soon. … manufacturing sector added just 9,000 jobs in June, after adding 70,000 over the prior two months.

With the workweek shortening by 0.5 hours, there is little reason to expect robust hiring.

Construction lost another 22,000 jobs, mostly in the non-residential sector …

retail sector lost 6,600 jobs, its second consecutive decline.

Finance shed 15,000 jobs, 6,500 of the losses were in real estate following the end of the homebuyers tax credit. …

Baker concludes his bleak analysis bleakly,

With state and local governments cutting back to deal with deficits, house prices falling again, and wages not keeping pace with inflation, there is little hope for a robust growth any time soon.

It is likely that the unemployment rate will rise in the second half of the year.

by jeopardy 2010-07-03 12:06PM | 0 recs
This chart sums it up well

From calculated risk (jobs in all the recessions since WWII)



by jeopardy 2010-07-02 08:58PM | 2 recs
RE: This chart sums it up well

That's a great chart. Looks like we are in an area not charted for 70 or 80 years.

by Jerome Armstrong 2010-07-02 09:34PM | 0 recs

That's what happens when the economy experiences a major financial crises.

To put things in perspective, worldwide manufacturing and employment actually fell more (by %) than they did during the Great Depression (although not quite as bad in the US this time as the Great Depression).

Even here, unemployment got up to something like 22% when calculated the same way they calculated unemployment in the 1930's. It got up to 25% at the absolute worst of the Great Depression.

Thank god (and FDR's ideals) for FDIC insurance, Social Security, Medicaid and Medicare, unemployment insurance, food stamps, stimulus spending, and yes, the bank bailouts.

Those are the things that kept us from have "hooverville" ("Bushville") tent cities springing up all over the place.


by jeopardy 2010-07-02 09:54PM | 2 recs
RE: This chart sums it up well

That is a good chart, and I think it highlights both our points. I'm focused on the fact that the current non-census line is trending upwards; you're focused on the fact that holy crap it's far down on the chart. Both these points matter, and I'm reminded of something I heard on NPR today, that the percentage of the country's working force that's employed is at an all-time low. That's very troubling, but not necessarily an indicator of where we're going - more an indicator of where we've been, since the line is trending up.

Since numbers are still so bad in this perspective, I do side with the stimulus-first deficit-reduction-later crowd. Since the GOP is going to gain seats, I want to keep perspective and focus on the trend - optimism now will help job growth later, on the psychological side of things.

by Nathan Empsall 2010-07-02 10:28PM | 0 recs
RE: This chart sums it up well

remember that that chart is % of jobs lost. that's total jobs, not taking into account population growth.

the % of the country's workforce who have jobs is still going down.

by jeopardy 2010-07-02 11:05PM | 0 recs
We Do have a failed model

I look foreword to your take on it.
I think it is clear the a Skimmer Tax (financial transaction tax) would be the best initial step we could take to begin the re-balancing. It is also quite clear that the forces of darkness will and have marshaled armies in opposition.
At the same time I cannot ignore the logic behind a payroll tax holiday, especially for small business. Indeed the reducing the cost of labor could help greatly. But I am a bit concerned of any additional raids on the structure of our social safety net as it will make arguments against it that much stronger. Additionally we would want the benefits to be more focused then any blanket holiday. If however it was a scaled rebate instead we could both limit the cost and maximize the benefits. Say we rebated between 5 and 10 times the median workers contribution almost all the benefit would go to small business.
Pairing these two Ideas may just be enough to get the Skimmer tax passed. Remember this is a "sin" tax meant primarily to reduce bad behavior. If the proceeds were directed to a scaled rebate of the payroll tax it just may be enough to break up the unified business front and get the votes needed.

by Judeling 2010-07-02 09:15PM | 0 recs
RE: We Do have a failed model

the problem with jobs is a lack of demand for goods and services. it's not payroll taxes.

businesses mainly aren't hiring because they don't have enough customers to necessitate more employees. it's already easier to get employees more cheaply due to so many people looking for work. but you don't hire another worker when you can't sell what he/she would produce.

a permanent reduction in payroll taxes for businesses could help a little on the margins, but it's not going to be one of the more stimulative things we could do. and a temporary tax holliday would be even less effective.

by jeopardy 2010-07-02 09:58PM | 0 recs
8.6% unemployment by October 2012

Assuming that the labor force grows at an average of 150,000 a month for the next 28 months and 200,000 jobs are created a month(like Clinton's eight years) during that same period, it would get the unemployment rate down to 8.6% at Obama's reelection.  Is that enough to reelect him?  Consider that the unemployment rate was 7.7% when he was inaugerated and the rate will have gone up almost a full point over his four years in office.

by Kent 2010-07-03 09:47PM | 0 recs


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