Reflections on the Employment Numbers

While the unemployment numbers for May were poor, there are signs in those numbers which need discussion.

First the obvious: 90% of the job creation was in the form of temporary census jobs. These 400,000 jobs are added to the 150,000 census jobs reported in earlier months. Nearly all of these jobs will end by August or September at the latest. That means that just prior to the elections in November, there will be a loss of half a million jobs or more and a big rise in the unemployment rate unless the economy is roaring forward at that point. This is bad news for the Democrats. After all, how do you convince someone that the stimulus package worked when two years later unemployment is still going up and job growth has ended or is anemic at best.

Second, there were distinct warning signs in the numbers. For example, manufacturing jobs added in May totaled 29,000 down from 40,000 in April. All of these figures are based upon surveys that have a reasonable amount of uncertainty in the mix, the direction of the numbers is unsettling. Manufacturing is supposed to be picking up as consumers buy more and exports rise as well. These numbers indicate that no such manufacturing surge is yet evident. That does not mean that none will follow, but it certainly does not seem likely. When one factors in the recent strength of the dollar especially against the Euro, a surge in exports seems less and less likely.

Another warning sign was the large number of people who left the work force. Close to a third of a million people just gave up and stopped looking for work. If things were getting better out there, more people would be rejoining the work force, not the contrary.

Third, other than census workers, there was a decline in state and local government payrolls. This is big news. It means that for the first time revenue shortfalls at the state and local level are taking a big bite out of the numbers of government employees. Nothing on the horizon indicates that government revenues will be rising any time soon, so that means more layoffs and higher unemployment.

Hopefully, the rise in the nubmer of unemployed that seems to be on the horizon will not demoralize or scare too many people and lead to the economic paralysis of the sort seen during the banking meltdown. Even a bit of fear could cause another contraction for the economy. Nevertheless, these numbers are sufficiently poor that it makes sense to prepare for the worst while hoping for the best.