Not Good Enough

3 September 2010



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August's Non-Farm Payrolls Show Some Strength

Just an hour or so ago, the Labor Department released the Non-Farm Payrolls figure for August. Private payrolls climbed 67,000, after a revised 107,000 increase in July that was more than initially estimated. Adding the government figures, which are skewed a bit due to the ending of the temporary census jobs, overall employment fell 54,000 for a second month and the unemployment rate rose to 9.6%. The latter figure is actually a good sign as about 500,000 people re-entered the labor force seeking work, suggesting optimism about finding employment. That said, there were not enough jobs created to secure the recovery.

By sector, manufacturing payrolls fell by 27,000 after gaining 34,000 in July. Service-providers slashed jobs by 54,000. Retailers let 4,900 workers go. For the first time in four months, the construction industry was hiring, adding 19,000 jobs. Temporary workers increased by 16,800. State and local governments reduced employment by 10,000, while the federal government lost 111,000 jobs. Average hourly earnings rose to $22.66 from $22.60 in the prior month, and the average work week was level at 34.2 hours.

With figures like this, it is doubtful that a double-dip recession is in the offing. That would require negative economic growth for two quarters, and in the second quarter, GDP rose 1.6%. Only a serious deceleration could cause a recession. "These are very nice numbers for the labor market," Kathy Lien, a director of currency research at GFT in New York told Reuters. "It means for the time being, some of the fears of weakness in the US economy may be misplaced as the data shows the labor market is not as bad as feared." That said, only a serious acceleration could add the 200,000 or so jobs per month that the nation needs to create.

Looking ahead, a Bloomberg survey of economists predicts that unemployment will hold above 9% for the rest of this and next year. Pressure on government employment will persist, and the private sector is not going to take off in quite the way everyone had hoped. "The painfully slow recovery in the labor market has restrained growth in labor income, raised uncertainty about job security and prospects, and damped confidence," Fed Chairman Ben Bernanke said in a speech in Jackson Hole, Wyoming, last week.

Mark Zandi, chief economist at Moody's Economy.com and former economic adviser to presidential candidate John McCain, told CNBC "The coast is not clear. I think it's very unlikely that we will not get to over 10 percent this year, and that means policymakers can't stand still. The Federal Reserve has to do more, and so does the President." One might add Congress, too.

However, the big problem is the business sector. Banks still aren't lending as they should, large corporations with loads of cash are looking at M&A activity rather than hiring, and when large-scale plans for new jobs come up in the boardrooms, the jobs are often in China. Eventually, businessmen and women will realize that they are going to have to start spending money again on staff and equipment, but they look like they plan to take their time doing it.

© 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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