In August 2011, the US unemployment rate remained unchanged at 9.1%. This was in-line with market expectations, however, the labour market participation rate actually rose fractionally to 64% from 63.9% in July.
During the month, total non-farm payrolls were unchanged, which was well below market expectations for an increase of 68 000 (this is a Bloomberg estimate, which had a forecast range of – 20 000 to a high of +160 000). There was also a significant downward revision to the previous two months data of -58 000 jobs.
It is worthwhile to note that the disappointing August employment report was aggravated by the two-week Verizon strike, which involved around 45 000 telecommunication workers. If these workers were added back to the report, the employment numbers would still be bad, but clearly not as shocking. On that basis, the private sector would have added 62 000 jobs in August. The Verizon strike ended on 22 August.
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 eight months of 2011, the job gains have averaged a slightly more respectable 109 000 a month; despite the weakness in May, June and August.
Slightly more encouragingly, the private sector added 17 000 jobs in August 2011, but this was also well below market expectations for an increase of 95 000. The US private sector has added jobs in each of the past eighteen months, at an average of 133 000 net new jobs a month.
The latest employment data will clearly heighten extreme concern about a return to recession conditions in the US.
Since December 2007 (when the US recession officially started), payroll employment is still down a net total of 6.85 million, or 5.0%. At its worst, however, the US economy had lost 8.74 million jobs.
In the month of August 2011:
- Health care employment rose by 30 000. Ambulatory health care services and hospitals added 18 000 and 8 000 jobs, respectively. Over the past 12 months, health care employment has grown by 306 000.
- Employment in mining continued to trend up in August (+6 000). Since reaching a trough in October 2009, employment in mining has risen by 144 000, with mining support activities accounting for most of the gain.
- Within professional and business services, computer systems design and related services added 8 000 jobs in August. Employment in temporary help services changed little over the month (+5 000) and has shown little movement so far this year.
- Employment in the information industry declined by 48 000 in August. About 45 000 workers in the telecommunications industry were on strike and thus off company payrolls during the survey reference period.
- Manufacturing employment was essentially unchanged in August (-3 000), following a gain of 36 000 in July. For the past 4 months, manufacturing has added an average of 14 000 jobs per month, compared with an average of 35 000 jobs per month in the first 4 months of the year.
- Elsewhere in the private sector, employment in construction; trade, transportation, and utilities; financial activities; and leisure and hospitality changed little over the month.
- Government employment continued to trend down over the month (-17 000). Despite the return of about 22 000 workers from a partial government shutdown in Minnesota, employment in state government changed little in August (+5 000). Employment in local government continued to decline. Since employment peaked in September 2008, local government has lost 550 000 jobs.
Overall, this month’s labour market report is very disappointing, even if you adjust for the impact of the Verizon strike. In particular, the downward revision to the previous two month’s data of -58 000 jobs is a major concern. Most of this downward revision relates to government employment. Government employment has now declined for 10 consecutive months, shedding 340 000 during that time. Within the private sector, it is clear that key parts of the economy are still struggling to gain traction three years after the recession started, in particular the construction industry (see our earlier note on the residential property market).
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 recover from the great recession (employment is still down almost 7 million jobs). This implies that the US will struggle to return to its desirable or even its historical rate of growth in at least the medium-term.
In the immediate term, the US economy is perilously close to a recession and is experiencing recession-like conditions in a number of sectors or components of the economy.
Download the presentation slides