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August's U.S. Labor Market Report May Provide a Spark of Confidence

Sep 9, 2010 9:44 AM

The recent jobs market report from the U.S. Bureau of Labor Statistics may provide a much needed spark of confidence for the U.S. economy, especially its workers and consumers, according to Alex Carrick, chief economist for Reed Construction Data, Norcross, Ga. While total employment declined by 54,000 in August over July, the private sector took on 67,000 more staff members. It was a 121,000 job decline in employment by government that caused the overall drop in jobs.

The national unemployment rate in August increased slightly, to 9.6% from 9.5% in July. October 2009 was when the jobless rate was at its worst: 10.1%. The unemployment rate in construction in August relaxed a little, to 17.0% from 17.3% the month before. Earlier in the cycle, construction’s jobless rate exceeded 20.0%. The direction of change is encouraging, says Carrick.

The government job cuts were almost all at the federal level in the latest month. Temporary hirings for the census earlier this year have been scaled back over recent months. At state and local levels, budget deficits are requiring some staff reductions as well as salary freezes.

The employment numbers match up with initial jobless claims. The number of first-time out-of-work benefit seekers ranged between 450,000 and 500,000 for the past month. At half a million, the number of people newly laid off is estimated to just about equal the number of newly hired.

U.S. real (i.e., inflation adjusted) growth in the second quarter of 2010 was 1.6%, following on the heels of a faster 3.7% pace in the first quarter. However, the concern about a possible double-dip recession in the second half of this year has diminished somewhat with August’s jobs report.

The recovery will be hesitant rather than robust for the next six months, according to Carrick, but there will be progress nonetheless. This is good news for a world economy that has lately had some doubts.

There is a set of statistics that is being overlooked in most of the analysis about the American labor market picture. It is a positive development that year-over-year employment has climbed close to or above 0.0% in almost all major job categories. That includes: professional and business services (mostly thanks to temporary help services), +2.1%; leisure and hospitality, +0.3%; manufacturing, 0.0%; retail, -0.3%; and transportation and warehousing, -0.4%.

The laggards are construction, -4.7% year over year; information services, -2.2%; and financial services, -1.5%. Education and health is in a separate category, at +2.0%, since it provides activities that are both more stable and more essential than many of the other sub-categories.

Total U.S. employment year over year is now +0.2%. In mid 2009, it was -5.0%. The important services sub-category which provides nearly 70% of all jobs is doing slightly better, at +0.6%.

It’s a truism that jobs are crucial to the health of the economy, says Carrick. They provide the confidence and the income to sustain and expand consumer purchases. They also form the bedrock for home ownership and asset value appreciations. In turn, a stronger U.S. economy is important for other countries, such as Canada, that are dependent on the vitality of goods and services exchanges.

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