Job Losses: A Dragging Indicator
The topline: The U.S. economy lost 467,000 (more) jobs in June 2009, which means that since the recession started in December 2007, 6.7 million jobs have disappeared.
Total job loss exceeded Wall Street economists’ estimates by 30% or so, and eclipsed revised May job losses by 45%.
Total unemployment is at 9.5%, a quarter-century record.
The jobs numbers for construction are mind-blowing. In a year, the official count on the unemployed in construction has risen by 816,000 jobs. Unemployment (officially) for construction has gone from 8.2% to 17.4% in 12 months. In 30 days, from May to June, construction lost 79,000 jobs.
Reports the New York Times:
The latest figures highlight a somber new reality for workers, economists said. As the recession enters its 20th month, private wages and salaries are falling, working hours are dwindling and more people are without work. In essence, economists say, months of deep, broad job losses are effectively making unemployment a way of life for millions.
The number of people who have been unemployed for more than 27 weeks has more than tripled since the recession began, to 4 million. The median time people go without a job has increased to nearly four months, from slightly more than two months at the outset of the recession in December 2007.
Job losses, and gains, lag the economy. It takes a pretty good economic lift to turn job loss rates into employment gains. Here’s the Wall Street Journal take:
When marginally attached and involuntary part-time workers are included, the rate of unemployed or underemployed workers hit 16.5% last month, up slightly from May.
The employment report is a sober reminder of the headwinds the U.S. faces even as other data suggest the recession may be nearing an end. The Institute for Supply Management manufacturing index increased in June from May, and though its level of 44.8 still signals a slight contraction in manufacturing, it is consistent with slight growth in the overall economy.
After plunging at rates near 6% at the end of 2008 and early 2009, at annual rates, economists think gross domestic product only fell around 1% or 2% in the second quarter, setting the stage for a resumption of tepid growth starting as soon as the current quarter.
Still, a jolt of consumption-driven adrenaline seems unlikely. Average hourly earnings were flat last month at $18.53. That was up just 2.7% from one year ago, a sign that inflation isn’t a risk for the Fed. However, stagnant wages could also weigh on consumer spending, especially with gasoline prices on the rise.
The pall of job loss, and continued threat to household income, opposes “Animal Spirits” collective behavior that could turn the Queen Mary 2 in the Upper Hudson River.
Policy needs to factor in real job loss numbers into its stimulus math, not hope. Clearly, the Wall Street consensus among economists is not the place to seek reality.
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