The Bureau of Labor Statistics announced Friday morning that another 345,000 jobs were lost in May, raising U3 unemployment to 9.4%. (U3 is one of the most narrow measurements of unemployment, but also the most widely reported. U6 unemployment, the BLS measure that includes workers who have given up looking for work and those that have taken part-time jobs while continuing to seek full-time employment, rose to 16.4%.) Ten percent unemployment, a figure scoffed at only months ago by most economists but predicted as a likelihood this year in my 2009 Predictions, is now only two months away.
In all likelihood, the news is worse than admitted to in this report. It isn’t corroborated by the weekly filings for unemployment. They’ve held steady above 600,000 per week, yet the monthly job loss figure drops by half? It doesn’t add up. This would require employers to be re-hiring laid-off workers at a frantic pace. Other surveys have found that there is little or no hiring taking place anywhere. So don’t be surprised to see this 345,000 figure quietly and significantly revised upwards when next month’s figures are released.
But the worst news is found in the breakdown of these job losses. The manufacturing sector of the economy, representing only 9% of the job market, gave up 156,000 jobs in May, more than the entire services sector, which accounts for 86% of non-farm civilian employment. For a president who has been cajoling other nations to rely less on exports and start importing more from the U.S. in the hopes of manufacturing leading our economy out of the recession, this is terrible news. The president’s approach – trying to talk his way out of the trade deficit – is failing, just as I predicted it would. Toyota dealers aren’t turning away customers and directing them to a Ford, GM or Chrysler dealership. Walmart hasn’t pulled their Chinese imports from the shelves. There’s been no boost in exports. The notion that these export-dependent nations will voluntarily fall on the sword and wreck their own economies just because Obama or Geithner have politely asked them to do so is laughable.
Any deficit spending-fueled recovery is only going to exacerbate the conditions that led to our economic melt-down in the first place, the trade deficit foremost among them. Sooner or later, Obama will have a choice to make: whether to put his own people back to work or allow other nations to put their people to work at our expense. He’ll have to choose between being just one more in a long line of presidents who stood by and watched America’s economic demise while being admired by the rest of the world for his eloquence and alliance-building skills, or as a president admired by Americans for putting our country back on a path to prosperity and fiscal balance while being despised by many in the world as a nationalist.