The Latest Employment Woes

Private-Sector Jobs Growth Stalls in May

Today’s release of the latest employment numbers by the Bureau of Labor Statistics confirms fears that the nascent economic recovery is not yet taking hold in the jobs market. Private-sector employers added only 41,000 jobs last month (see figure), which is better than letting workers go but insufficient to keep pace even with increases in the labor force due to population growth. The U.S. population grew by 170,000 last month, with two-thirds (65 percent in May) in the labor force.

monthly private-sector job growth

Clearly there is still much to do to get our economy back to full employment. Economists talk about whether the recovery of jobs from the losses during the Great Recession will look like a “ V” (a sharp drop in employment followed by a sharp uptick) or an “L” (a sharp drop in employment followed by lackluster employment growth). At this point, it looks like the labor market is stabilizing into an L-shaped pattern, without sufficient job creation to bring unemployment down.

This would not only be devastating for workers and their families but also threaten the path of the economic recovery overall. Consumers make up about 70 percent of our economy, and income from employment makes up about 80 percent of the typical family’s income. Without job gains amid the kind of credit-constrained economy households are now experiencing, consumption will stall, which in turn will drag down economic growth. Slower economic growth will mean lower tax revenues, which will increase the federal budget deficit and condemn millions of Americans to the devastation wrought by high unemployment and a lower standard of living.

Today’s jobs report should be a wake-up call to policymakers that their work to spur economic growth is not done. While hiring for work on this year’s census led to 411,000 jobs created in May, state and local governments were laying workers off. The temporary census jobs are boosting employment nationwide, helping to increase consumption in local economies. At the same time, state and local budget woes have led them to lay off workers, which will drag down growth in local economies. Providing aid to state and local governments so they can maintain employment should be a top priority.

There are bright bits of news in today’s report. Employers are no longer laying off workers, on net, and hours worked are up. The average weekly hours for production and nonsupervisory employees rose to 33.5 hours in May from 33.1 hours a year ago. Further, the employer survey shows that manufacturing added 29,000 jobs in May, the fifth straight month of job gains. And hours worked are continuing to increase, as are average overtime hours in manufacturing, which are up to 4.1 hours per week from 2.8 hours a year ago. These are positive signs that employers are seeing improvements in demand for their goods and services.

Employers overall, however, are simply not hiring. Data from the BLS’s Job Openings and Labor Turnover Survey shows that while layoffs have receded back to pre-recession levels, hiring has remained flat over the past year, at an average of just over 4 million new hires per month. This lack of hiring is underscored by numerous data points in today’s release. Overall, the pace of private sector job creation slowed in May. And employers are not ramping up temps, usually an indication of future hiring. Temporary help added 31,000 jobs in May, but the pace of job growth continues to slow. Over the winter (November through January), temporary help added an average of 64,500 jobs each month jobs, over twice May’s rate.

The lack of hiring means workers are not finding new jobs. While the unemployment rate edged down to 9.7 percent in May, it has held steady at just under 10 percent for all of 2010, indicating that there has been little progress in pulling those out of work into jobs.

In fact, record numbers of workers are giving up their job searches. In April, there was a sharp uptick in the number of people without a job who began searching for work and thus counted unemployed. But it seems that for many those job searches were not fruitful as the U.S. labor force lost 322,000 workers in May. The BLS considers someone out of the labor force if they do not have a job and is either unavailable for a job or not searching for one; if someone is without a job and both available and actively engaged in a job search, they are counted as unemployed. Nearly 3 million people report being “unemployed” in April, but “out of the labor force” in May—the largest number reporting that transition since 1990 when the BLS began releasing the Job Openings and Labor Turnover Survey data.

Even as many unemployed workers give up their job searches, there continue to be record-high numbers of “long-term unemployed,” or those out of work and actively seeking a job for at least six months. In May, there were 6.7 million long-term unemployed, accounting for 46 percent of all unemployed job seekers. With nearly six job seekers for every opening available and little net hiring, the chances of getting one of those is indeed slim.

Even so, the Senate went home this week without extending long-term unemployment benefits. An estimated 1.2 million workers will lose their unemployment benefits if Congress does not pass a bill by the end of June. Last Friday, the House passed the American Jobs and Closing Tax Loopholes Act, which extends benefits to the long-term unemployed, allowing for up to 99 weeks maximum extended benefits after the first three tiers of benefits have been exhausted. The Senate should act quickly to reinstate these benefits to the long-term unemployed.

The impact of long-term unemployment workers and their families can be devastating. Depression, health problems, marital problems, lower earnings upon re-employment, and social isolation are only a few of the scarring effects researchers have documented. Last year’s American Recovery and Reinvestment Act is credited with saving or creating 1.2 million to 2.8 million jobs, which has stopped the massive layoffs. But we still need to get people back to work.

The Local Jobs for America Act of 2010, introduced by Rep. George Miller (D-CA), would create approximately 1 million jobs by providing $100 billion in funds to be used over two years to protect state and local government jobs and create local government and nonprofit-sector jobs. This is the kind of legislative action needed to break the pattern of lingering unemployment slowing wage growth even as productivity and profits rise. Hourly wages for production and nonsupervisory employees grew by an annualized rate of 1.2 percent over the past quarter, while the Consumer Price Index, which measures changes in prices, rose by 2.2 percent. Thus, while workers’ wages are rising, they are not keeping pace with inflation, which is typical in periods of high unemployment. We will likely not see strong wage growth until the unemployment rate comes back down.

Heather Boushey is Senior Economist at the Center for American Progress. To read more of our economic analysis and recommendations for economic recovery go the the Economy page of our website.