Bad May Unemployment Report Just More of The Same

This morning’s unemployment report got about the same reaction as a cockroach in a punch bowl.  The addition of 54,000 jobs in May was a huge disappointment, since the consensus forecast was a gain of 190,000 jobs.  To make matters worse, the U3 unemployment rate rose to 9.1%, moving in the opposite direction of forecasts of a decline to 8.9%.  The news was bad – true – but when you examine the details of the report, you find that the news is nothing more than a continuation of a bad trend that’s been in place since the “end”  (little more than a leveling off)  of the recession that began in 2008.

Here’s my spreadsheet and charts:

Unemployment Calculation     Unemployment Chart     Labor Force & Employment Level     Unemployed Americans     Per Capita Employment

As you can see, the latest data is nothing more than the continuation of the “new normal” that has set into the American economy – steady unemployment of about 9%.  The reason this report is getting more attention is that it confirms what has slowly begun to dawn on everyone – that the economic recovery is stalled and in danger of backsliding into a double dip. 

One of my favorite pieces of data used in calculating unemployment is the “employment level.”  If this number isn’t going up, no jobs are being created.  Examining the data, we find that this number has risen just slightly less than 2 million jobs since bottoming out in December of ’09.  While that may sound impressive, it has barely kept pace with the growth in the labor force, which has risen by the same amount.  Worse, nearly all of that increase took place from January through April of last year, when it rose by nearly 1.7 million jobs.  Since, then, in the past 13 months, it has risen by only 0.3 million jobs, far below the rate needed to absorb growth in the labor force.  Yet, during that period, the official U3 unemployment rate fell from 9.9% to 9.1%.  The numbers don’t add up, a situation explained away by the administration with the claim that a million workers have given up looking for work, while another million new workers haven’t even begun trying.

Per capita employment, the employment level divided by the U.S. population, slipped slightly for the 2nd month in a row and, at 44.88%, remains very, very close to the worst level of the recession – 44.68% in December, 2009 (a figure that was matched in November, 2010). 

Make no mistake, a double-dip is on the way – a new recession that may well be worse than the last since both the federal government and the Federal Reserve have virtually exhausted their gimmicks for creating the illusion of a recovery.  There is no appetite for any more stimulus, not by lawmakers and not by the credit markets.  If anything, spending is going to be cut drastically, exacerbating job losses among federal, state and local government workers.  (See below.)  The Federal Reserve has little appetite for another round of quantitative easing, seeing that the last round merely stoked inflation and market bubbles while doing little to boost the economy.  The Obama administration is left with only two options:  reform trade policy and restore a balance of trade while simultaneously reining in the importation of more foreign workers, or stand idly by and watch the economy sink into an even worse recession while unemployment resumes its climb above 10%.  I’ve never in my life seen the economy so boxed in on all sides.  Yet, I have my doubts that Obama will do the right thing. 

* * * * *

The anemic addition of 54,000 jobs breaks down as follows:

  • Professional and business services:  + 44,000
    • accounting & bookkeeping:  + 18,000
    • computer systems design, etc.:  + 8,000
  • Health care:  +17,000
  • Mining:  +7,000
  • Construction:  unchanged
  • Retail:  unchanged
  • Transportation & warehousing:  unchanged
  • Leisure & hospitality:  unchanged
  • Manufacturing:  – 5,000
  • Local governments:  -28,000

I know what you’re thinking:  these numbers don’t add up to 54,000.  I can’t explain it.  Makes you wonder if the real picture is even worse, doesn’t it?

This was the first decline in manufacturing employment in six months, a bad sign since manufacturing has been one of the few bright spots in the economy and the sector upon which the Obama administration was pinning all its hopes, with its plan to double exports in five years. 

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