Less “Double Dip”
Written by Jeff Thredgold, President, Thredgold Economic Associates
U.S. employment data remained on the weak side in August. At the same time, revisions to prior data, as well as slightly-stronger-than-expected new information regarding manufacturing, consumer confidence, and retail sales, has lessened talk of another downturn—the infamous double dip—in coming months.
The American economy suffered a net loss of 54,000 jobs in August, less painful than the consensus forecast of a 105,000 net loss. As in recent months, the culprit was the elimination of more Census jobs, with another 114,000 jobs ending.
Just as the addition of more than 700,000 temporary Census jobs bloated still modest job gains last spring, the cessation of the jobs has understated “headline” employment data in recent months. An estimated 82,000 additional Census jobs are still to conclude.
The August jobs report saw a net gain of 67,000 jobs in the private sector, better than the 44,000 expected...good news. In addition, net employment gains of the two prior months were revised to show 123,000 more jobs…more people at work…than the initial data suggested…also good news.
The nation’s unemployment (jobless) rate moved to 9.6% in August, versus 9.5% in the two prior months. The rise, which matched economists’ forecasts, occurred for the “right” reason…an estimated 550,000 people entering or reentering the labor force in search of a job. Unless and until these people find a job, they are counted as unemployed.
The nation’s unemployment rate has now been north of 9.0% for 16 months, the longest such period in more than 25 years. The current 9.6% rate is also only 0.5% below the 10.1% peak recorded last October.
Most forecasting economists expect the nation’s jobless rate, which has averaged 9.7% so far in 2010, to average more than 9.0% in 2011. It will likely be 5-7 years before the jobless rate declines to a more traditional level of 5.5%-6.5%...and that’s if we’re lucky.
The nation’s goods producing sector saw estimated employment move sideways in August, versus a 37,000 net gain in July. Manufacturing employment fell by a disappointing 27,000 jobs during August, after rising in recent months. Construction employment reversed that pattern, with a 19,000 rise in jobs, following small losses in prior months. However, roughly half of the 19,000 rise represented workers returning after a strike in July.
The nation’s mining sector added 8,000 jobs in August. The Bureau of Labor Statistics notes that since bottoming in October 2009, employment in the mining sector has increased by 72,000 positions.
The nation’s much larger non-government service providing sector added 67,000 jobs in August. As usual, education & health services led the way, with the addition of 45,000 net new jobs. Professional & business services added 20,000 jobs during the month (mostly temporary jobs), while the leisure & hospitality sector added 13,000 jobs.
Retail trade lost 5,000 jobs during August, while transportation & warehousing lost 7,000 jobs. Financial activities and information sectors lost a combined 5,000 jobs.
- The number of people counted as unemployed rose to 14,860,000 in August, versus 14,599,000 in July. As noted before, many of these people were new entrants to the labor force
- The number of people working part-time who would prefer to work full-time rose by 331,000 to 8.9 million in August. The number had been in decline since April
- The rise as noted above, combined with the actual number of unemployed and those discouraged workers who have left the labor force (known as the “underemployment rate”) rose to 16.7% in August, versus 16.5% in July
- The number of people unemployed for 27 weeks or longer fell by 323,000 to roughly 6.2 million. This total was 42.0% of the unemployed, versus 44.9% in July. Some of these people found jobs, while others have likely given up looking for a job
- Average hourly earnings of all employees on private nonfarm payrolls rose by six cents (up 0.3%) to $22.66
The unemployment rate for adult men (20 years and over) rose to 9.8% in August from 9.7% in July. The rate one year ago for adult men was 10.2%. The unemployment rate for adult women was 8.0% in August, versus 7.9% in July and 7.7% a year ago.
Why the much higher jobless rate for adult men? Hundreds of thousands of jobs lost in recent years were in manufacturing and construction, industries historically dominated by men. Many, many thousands of these jobs will never return.
The jobless rate for teenagers was a very painful 26.3% in August, up from 26.1% in July. The jobless rate for Whites was 8.7% in August, while the rate for Blacks or African Americans was 16.4%. The Asian jobless rate (not seasonally adjusted) was 7.2%, while the rate for those of Hispanic or Latino ethnicity was 12.0%.
The U.S. economy has added 723,000 net new jobs during 2010, a far cry from what is needed to bring the unemployment rate lower. Those 723,000 jobs, while good news, also do little to replace the 8.4 million jobs lost in 2008 and 2009.
More & More Government
The President and the Congress have more and more programs in mind to help a struggling U.S. economy. On Labor Day, the President proposed another $50,000,000,000 in spending to create jobs…make that union jobs…to bolster the nation’s highways, railways, and runways. This is on top of roughly $38,000,000,000 in additional spending approved a few weeks ago to, in part, support teachers…make that union teachers…across the nation.
The President—with national elections less than two months away and a U.S. economy going nowhere—is expected to propose other tax incentives and other small business job creation incentives in coming days. Some of these, including a permanent extension of tax incentives for business owners who invest in research and development, are worthwhile.
If the President and the Congressional leadership really want to be effective, they could collectively announce that the Bush tax cuts of 2001 and 2003 will be extended for at least two years…for ALL income earners. Another nice and effective touch would be for them to announce that they will be taking the rest of the year off.