The sideways economy
The headline from this morning’s Labor Department jobs report isn’t cheery: the number of people on payroll fell by 131,000 in July. That’s not the direction we need to be going. The payroll number for June was also revised downward, from 125,000 jobs lost to 221,000.
It’s important, though, to look at the difference between what’s going on in the government and private sectors. That’s especially true for July, when the Census Bureau let go of many of the workers it had temporarily hired to help with data collection. Of the 202,000 government jobs lost last month, 143,000 were Census positions.
Private payrolls, by contrast, grew–by 71,000 jobs. Of course, that’s still nothing to write home about. We need hundreds of thousands of new jobs each month to even start to make up for the millions wiped out by the recession. Seventy thousand is a step in the right direction, especially considering that the revised data for June show a private-sector gain of only 31,000 jobs. Still, it’s a very, very small step.
The bigger picture here is that the economy is still in a hazy patch. The eternal question of “Are things getting better?” isn’t going to be answered with this jobs report. The report shows manufacturing jobs trending up–that’s great news–and average earnings slightly on the rise, as well. In July, the average hourly pay of all employees inched up from $22.55 to $25.59.
But on the other side of the optimism/pessimism coin is the fact that nearly half of all people who are unemployed–6.6 million of them–have been out of work for more than six months. That’s down slightly from last month, but still deeply problematic, since at a certain point unemployment begets unemployment. People who sit out of the workforce for too long may be perceived as not having up-to-date skills. Naturally, they get discouraged about looking for work.
The unemployment rate, which comes from a different Labor Department survey, is yet another sign that the economy is in a holding pattern. For July, the unemployment rate came in at 9.5%, unchanged from last month. A broader measure of people out of work, which includes those who didn’t look for a job in July, sits at 16.5%–also unchanged.
One of the frustrating things about this situation is that corporate profits have clearly recovered. For America’s largest companies, it’s been a great earnings season. So why aren’t those companies hiring?
Former Labor Secretary Robert Reich takes a stab at an answer in this recent San Francisco Chronicle piece. He finds three main reasons. First, companies are selling more overseas and as a consequence are expanding production there instead of in the U.S. Second, money that corporations are investing in the U.S. is going toward labor-saving technology, not new jobs. Finally, many companies are using profits to buy back their stock, thus buoying share price–but, again, not headcount.
And so the jobs market continues to lag.