In July 2011, the US unemployment rate eased to 9.1% from 9.2% in June 2011. This was better than market expectations for the rate to remain unchanged at 9.2%. However, the labour market participation rate fell to 63.9%; the lowest level since 1984.
During the month, total non-farm payrolls rose by a more encouraging 117 000, which was above market expectations for an increase of 85 000 (this is a Bloomberg estimate, which had a forecast range of a low of zero jobs to a high of +150 000). There was also an upward revision to the previous two months data of +56 000 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 seven months of 2011 the job gains have averaged a slightly more respectable 133 000 a month; despite the weakness in May and June.
More encouragingly, the private sector added 154 000 jobs in July 2011, which was also above market expectations for an increase of 113 000. The US private sector has added jobs in each of the past seventeen months, at an average of 140 000 net new jobs a month.
The latest employment data will clearly relieve some of the extreme concern about a return to recession conditions in the US. The latest employment data is consistent with a soft-patch in the US, but not consistent with a double-dip recession.
Since December 2007 (when the US recession officially started), payroll employment is still down a net total of 6.79 million, or 4.9%. At its worst, however, the US economy had lost 8.74 million jobs.
In the month of July 2011:
- Health care employment grew by 31 000. Ambulatory health care services and hospitals each added 14 000 jobs over the month. Over the past 12 months, health care employment has grown by 299 000.
- Retail trade added 26 000 jobs in July. Employment in health and personal care stores rose by 9 000 over the month with small increases distributed among several other retail industries. Employment in retail trade has increased by 228 000 since a recent low in December 2009.
- Manufacturing employment increased in July by 24 000. Nearly all of the increase was in durable goods manufacturing. Within durable goods, the motor vehicles and parts industry had fewer seasonal layoffs than typical for July, contributing to a seasonally adjusted employment increase of 12 000.
Manufacturing has added 289 000 jobs since its most recent trough in December 2009, and durable goods manufacturing added 327 000 jobs during this period.
- In July, employment in mining rose by 9 000; virtually all of the gain (+8 000) occurred in support activities for mining. Employment in mining has increased by 140 000 since a recent low in October 2009.
- Employment in professional and technical services continued to trend up in July (18 000). This industry has added 246 000 jobs since a recent low in March 2010. Employment in temporary help services changed little over the month and has shown little movement so far this year.
- Elsewhere in the private sector, employment in construction, transportation and warehousing, information, financial activities, and leisure and hospitality changed little over the month.
- Government employment continued to trend down over the month (-37 000). Employment in state government decreased by 23 000, almost entirely due to a partial shutdown of the Minnesota state government. Employment in local government continued to wane over the month.
Overall, this month’s labour market report is more encouraging than the previous two months data and in-line with the July ADP employment report released earlier last week, as well as the recent reduction in weekly jobless claims. The growth in private sector employment is certainly very respectable, albeit not exciting, while the ongoing decline in government employment is understandable, given the need for fiscal austerity. Government employment has fallen in each of the past 9 consecutive months and by a total of 268 000 jobs and is down 946 000 in the past 14 months.
Within the private sector, key parts of the economy are still struggling to gain traction, in particular the construction industry. Alan Greenspan made a key point in an interview two months ago 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; but we don’t expect a so-called double-dip recession.
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