The Bureau
of Labor Statistics said today that the country added only 69,000 jobs in
May (compared to an average gain of 226,000 per month during the first quarter)
and the unemployment rate ticked back up to 8.2% from 8.1% due to an increase
in the number of people looking for work.
The latter had been expected.
People who give up looking for work and drop out of the labor force
usually return once the job market appears to be improving.
Employment increased in health care, transportation and
warehousing, and wholesale trade but declined in construction. Other areas remained largely unchanged.
Unemployment among adult men (7.8%) and adult women (7.4%)
were up slightly for April. Unemployment
among teenagers (24.6%), Blacks (13.6%) and Hispanics (11%) remained high as
did the number of long-term unemployed which rose from 5.11 to 5.4
million. The long-term unemployed (over
26 weeks) now account for more than 40% of the unemployed.
The good news is that the private sector continues to add
jobs but not at a rate sufficient to make much difference in the unemployment
rate. Also, the state and local
government continue to lay off workers making the jobs recovery even more
difficult.
This recession appears to be following the pattern of the
last two recessions. Traditionally
during a recession we would see a “V” shape sharp decline followed by an
equally sharp recovery once the recession ended. In this recession like the last two in the
early 1900s and early 2000s, has followed more of a “check mark” shape with a
sharp decline followed by a gradual recovery.
Several things seem to be causing the slow recovery. First, the impact of the 2009 stimulus is now
almost entirely gone and we are seeing the consequences of not enacting a
second stimulus to aid the recovery which most mainstream economists had urged. Second, during this recession businesses have
been able to introduce a substantial amount of new technology and to demand
more from existing workers. As a result,
we have seen sharp productivity gains.
Demand has not returned to a level in many industries where businesses
are forced to hire more people. In fact,
the average workweek in May for all employees actually DECLINED slightly to
34.4 hours. We are not going to see
major improvement in jobs until the average workweek starts climbing again. That will not happen until demand
improves. Again, it is why we have
needed a second stimulus to pump more demand into the economy. Ironically, the U.S. government continues to
be able to borrow at extremely low interest rates which would have made it
relatively easy to fund a second stimulus (10-year Treasury
notes hit a record low of 1.54 percent on Thursday). Finally, the economic situation in Europe is
not helping. Businesses with European
operations are seeing their revenues/sales fall and are nervous about the
future. Indeed, the deteriorating
situation in Europe, particularly in regard to Greece, Spain and Italy, which
is a product of an over reliance on austerity rather than stimulus and growth
measures, threatens the U.S. recovery.
Obviously, the sluggish jobs recovery is bad news for Obama
and good news for Romney but it is too early to say how great an impact it will
have on Obama’s chances for re-election.
Right now the race is tight in the popular vote but Obama retains a
substantial lead in the Electoral
College vote, which is what really counts.
I don’t think we will have any clear indication of how this election
will turn out until after Labor Day and perhaps not until the end of
September. If the jobs picture remains
close to 8% and, particularly if the trend is flat or not improving, then Obama
may be in real trouble. Unfortunately,
the only thing Obama could do to change the situation would be to pass another
quick stimulus which is not remotely possible.
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