In June 2011, the US unemployment rate rose to 9.2% from 9.1% in May 2011. This was worse than market expectations for the rate to remain unchanged at 9.1%. This month the labour market participation rate fell to 64.1%; the lowest level since 1984.
During the month, total non-farm payrolls rose by a mere 18 000, which was well below market expectations for an increase of 105 000. This is a Bloomberg estimate, which had a forecast range of a low of 60 000 to a high of 175 000. In other words, out of the 85 analysts surveyed no-one thought that the June jobs report would show a gain of less than 60 000 jobs. There was also a modest downward revision to the previous two months data of -44 000 jobs.
During 2010, the US economy created 940 000 jobs, or an average of 78 000 jobs per month. That is below the estimated 100 000 increase in the number of people entering the job market every month.
In the first six months of 2011 the job gains have averaged a slightly more respectable 126 000 a month; despite the weakness in May and June. More encouragingly, the private sector added 57 000 jobs in June 2011. However, this was also well below market expectations for an increase of 132 000.
The US private sector has added jobs in each of the past sixteen months, at an average of 136 000 net new jobs a month, but clearly there has been a significant slowdown in job growth momentum over the last two months, which is deeply concerning. The latest employment data will clearly heighten expectations that the current slowdown in the US growth momentum is more than just a ‘soft-patch’.
Since December 2007 (when the US recession officially started), payroll employment is still down a net total of 6.97 million, or 5.0%. At its worst, however, the US economy had lost 8.74 million jobs.
In the month of June 2011:
- Within professional and business services, employment in professional and technical services increased in June (+24 000). This industry has added 245 000 jobs since a recent low in March 2010. Employment in temporary help services changed little over the month and has shown little movement on net so far this year.
- Health care employment continued to trend up in June (+14 000), with the largest gain in ambulatory health care services. Over the prior 12 months, health care had added an average of 24 000 jobs per month.
- In June, employment in mining rose by 8 000, with most of the gain occurring in support activities for mining. Employment in mining has increased by 128 000 since a recent low in October 2009.
- Employment in leisure and hospitality edged up (+34 000) in June and has grown by 279 000 since a recent low in January 2010.
- Employment in government continued to trend down over the month (-39 000). Federal employment declined by 14 000 in June. Employment in both state government and local government continued to trend down over the month and has been falling since the second half of 2008.
- Manufacturing employment changed little in June. Following gains totaling 164,000 between November 2010 and April 2011, employment in this industry has been flat for the past 2 months. In June, job gains in fabricated metal products (+8 000) were partially offset by a loss in wood products (-5 000).
- Finance lost 15 000 jobs, while the retail sector gained 5 000 jobs.
- Construction employment was essentially slightly lower in June (-9 000). After having fallen sharply during the 2007-09 period, employment in construction has shown little movement on net since early 2010.
Overall, this month’s labour market report is extremely disappointing and difficult to explain given the better than expected ADP employment report released yesterday and the current level of weekly jobless claims.
Clearly the ongoing decline in government employment (while understandable given the need for fiscal austerity) is aggravating the situation. Government employment has fallen in each of the past 8 consecutive months and by a total of 238 000 jobs and is down 916 000 in the past 13 months.
But even within the private sector, key parts of the economy are simply struggling to gain traction, in particular the construction industry. Alan Greenspan made a key point in an interview last month that the US economy had never recovered without a recovery in construction and housing activity (and the associated increase in construction employment). Attached is a chart on employment in construction which illustrates this point.
Given the structural economic difficulties in the US (housing market overhang, loss of production activity to China, huge fiscal constraints etc etc), it appears likely that employment will take a number of years to fully recover from the great recession. This implies that the US will struggle to return to its desirable or even its historical rate of growth in at least the short- to medium-term.
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