In May 2011, the US unemployment rate rose to 9.1% from 9.0% in April 2011. This was worse than the market expectations for the rate to ease to 8.9%. Also, the labour market participation rate remained unchanged at 64.2% for the fifth consecutive month; the lowest level since 1984.
During the month, total non-farm payrolls rose by a mere 54 000, which was well below market expectations for an increase of 165 000 (although this expectation was revised lower in the week after the shock ADP employment was released). There was also a modest downward revision to the previous two months data of -39 000 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 people entering the job market every month. In the first five months of 2011, the job gains have averaged a more respectable 156 000 a month, despite the weakness in May.
Encouragingly, the private sector added 83 000 jobs in May 2011. However, this was also well below market expectations for an increase of 173 000. The US private sector has added jobs in each of the past fifteen months, at an average of 143 000 net new jobs a month.
Since December 2007 (when the US recession officially started), payroll employment is still down a net total of 6.94 million workers, or 5.0%. At its worst, however, the US economy had lost 8.74 million jobs.
In the month of May 2011:
- Employment in professional and business services continued to increase (+44 000). Notable job gains occurred in accounting and bookkeeping services (+18 000) and in computer systems design and related services (+8 000). Employment in temporary help services was little changed.
- Health care employment continued to expand in May (+17 000). Employment in this industry has risen by an average of 24 000 per month over the past 12 months.
- Mining added 7 000 jobs in May. Employment in mining has risen by 115 000 since a recent low point in October 2009.
- Employment in manufacturing changed little in May (-5 000). Job gains in fabricated metal products and in machinery were offset by losses in transportation equipment, paper and paper products, and printing and related support activities. The manufacturing industry added 243 000 jobs from a recent low point in December 2009 through to April 2011.
- Construction employment was essentially unchanged in May. Employment in this industry has shown little movement since early 2010, after having fallen sharply during the 2007-09 period.
- Employment in local government continued to decline over the month (-28 000). Local government has lost 446 000 jobs since an employment peak in September 2008.
- Employment in other major industries, including retail trade, transportation and warehousing, information, financial activities, and leisure and hospitality, changed little in May.
Overall, this month’s labour market report is very disappointing. Clearly the disruptions to the global motor industry, as a result of the March earthquake in Japan, had some effect on manufacturing and perhaps retail employment (and therefore can be considered transitory), but this month’s labour market weakness is broader than that.
The government is clearly under financial strain and is mostly likely going to have to continue reducing their labour force month-by-month. Government employment has already fallen in each of the past 7 consecutive months and by a total of 175 000 jobs.
Other sectors of the economy are also struggling to gain traction, in particular the construction industry. Alan Greenspan made a key point in an interview recently with CNBC that the US economy has in the past never recovered without a recovery in construction and housing activity (and the associated increase in construction employment). I have attached a chart on employment in construction which illustrates this point, and the fact that construction activity remains extremely depressed. (A fuller explanation of this point will be provided in upcoming presentations).
Given the structural economic difficulties in the US (housing market overhang, loss of production activity to China, huge fiscal constraints, etc), it appears likely that employment will take a number of years to fully recover from the great recession.
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