Payrolls Disappoint, Employment Recovery Far from Imminent

This morning's Non-Farm Payrolls figure was a disappointment. Overall, the country lost 131,000 jobs, and the unemployment rate held steady at 9.5%. While there are some caveats about the headline figure, the fact is unavoidable that this journal has been excessively optimistic about the employment recovery. While the economy itself is doing well, the expected recovery in hiring just is not there yet. Moreover, it does not appear to be coming any time soon.

The Labor Department's figure of 131.000 jobs lost includes 143,000 temporary census jobs that came to an end when all Americans were counted. Some economists believe these jobs should not have been counted in the first place, but virtually all who are looking at the employment numbers believe they need to be discounted to uncover the true jobs picture. Companies as a whole added 71,000 jobs in July.

Bloomberg reported, "Manufacturing payrolls increased by 36,000 in July, more than the survey median of a 13,000 increase and reflecting a 21,000 rise in employment in the motor vehicle and parts industry." At the same time, "Employment at service-providers fell for a second month. Construction companies cut payrolls by 11,000 after reducing them 21,000 in June. The number of temporary workers decreased by 6,000, the first drop since September." And "Government payrolls decreased by 202,000. State and local governments employment declined by 48,000, while federal government jobs dropped by 154,000."

Quite why the private sector has failed to take on new employees is something of a puzzle. Productivity increases (that is, getting more out of existing staff) can only go so far. While it is true that a great many jobs have moved overseas (never to return), lots of work can not be exported (construction, infrastructure etc.).

The only plausible explanation is that managers remain shell-shocked. Economics is largely driven by psychology, namely the competition between greed and fear. Fear took over about the time Bear Stearns died, and one had felt that greed should have taken over by now. Clearly, it has not. Therefore, it is safe to say that jobs will not come back until managers have had a deluge of positive news. A second stimulus package, as Paul Krugman and others have proposed, might do the trick. By the same token, that is politically unlikely thanks to the deficit hawks and their ill-timed worries about the deficit (where were they during the Bush years?).

Instead, the good news will have to come as a slow and steady trickle. Where a single legislative act could produce results in a quarter or two, the economy as a whole will have to take a year or two to convince employers to start hiring again one small statistic at a time. For the third time in a row, America is looking at a jobless recovery.

© Copyright 2010 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Ubuntu Linux.

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