October 7, 2011
The economy added 103,000 jobs in September, better than economists expected. But unless the tepid pace of private sector expansion reverses soon, high unemployment will plague the U.S. economy throughout the 2012 election year.
The private sector added just 137,000 jobs last month, a number that was inflated by the return to work of 45,000 striking Verizon employees. Governments, meanwhile, cut 34,000 jobs with cutbacks at the Postal Service contributing to the ongoing pain being felt at the state and local level. The overall unemployment rate remained stuck at 9.1 percent, the Labor Department reported.
“The outlook is for below potential growth over the next year,” said Lawrence Mishel, the executive director of the Economic Policy Institute, a liberal-leaning think tank. “That’s not going to bring the unemployment rate down.”
“The job market would be a lot stronger now if we hadn’t had this emphasis on budget cutting,” added Gus Gaucher, a senior macroeconomist at Moody’s Analytics. With the 10-year, $1 trillion federal budget reduction package signed in August about to take effect, and the possibility that a $1.5 trillion budget-cutting package will be signed in December, shrinkage in government jobs will likely pose a drag on job growth for most of the next decade. Many government agencies are instructing officials to prepare for substantial workforce reductions early next year, a source at a federal agency said.
That’s going to put even more pressure on the private sector to pick up the slack. Unfortunately, since April, payroll employment has expanded by an average of just 72,000 jobs a month (including an upward revision of zero job growth in August to 57,000 new jobs) compared with 161,000 new jobs in the prior seven months. Over the past year, state and local governments have cut over a half million jobs.
The official unemployment rate underestimates the shock being felt across the country as job markets stagnate. The broadest measure of unemployment, which includes people who have stopped looking for work and those who settle for part-time jobs, rose last month to 16.5 percent from 16.2 percent the month before.
The unemployment rate among African-Americans, while down slightly last month, remains at a depression-level 16 percent. Unemployment among Hispanics remained at 11.3 percent, more than two percentage points above the national average.
“We’re stuck at high unemployment,” said Mishel, whose organization backs even stronger measures than the $487 billion in tax cuts and infrastructure spending included in President Obama’s jobs plan. Echoing the president’s comments at his press conference Thursday, he said, doing nothing shouldn’t be an option. “It you’re swimming in deep water and someone doesn’t push your head underwater, it’s hard to feel good about that,” Mishel said.
There was also a continuation of some worrisome trends within the job growth numbers. The health-care sector, which is 17 percent of the total economy, continued to lead the way by adding 44,000 jobs, nearly a third of the private-sector total. Physician offices and other ambulatory services added 26,000 jobs while hospitals added 13,000 employees.
But health care operates like a tax on the rest of the economy. As its share of economic activity expands, it leads to higher health insurance premiums for employers, which translates into lower wages and less consumption by other workers. That, in turn, means fewer new jobs in other sectors.
Meanwhile, construction, another large sector of the economy, remains flat on its back. While it added 26,000 jobs last month, virtually all of that was concentrated in the commercial and industrial sector. The new-home construction market remains depressed due to stagnant sales of new and existing homes despite rock-bottom mortgage interest rates and steadily falling prices.
There was also troubling signs on the retail front as employers appear to be cutting back in anticipation of a weak holiday buying season. Though the overall sector, which includes restaurants, added 13,600 jobs, that masked a decline of 9,000 jobs at electronics and appliance stores.
The overall new jobs picture “reduces the likelihood that the economy will fall back into recession,” said Faucher of Moody’s Analytics, “but it is not a great number.”