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Economists and others weigh in on the decline in U.S. jobs.
–The “Great Recession” has officially morphed into the “Great Stall”. There are no signs in this morning's report on July employment of building momentum for the second half of this year. If anything, there are more signs of a deteriorating labor situation . –Steven Blitz, Majestic Research
–Employment growth seems to have stalled over the past few months. Longer work schedules and robust productivity growth can sustain the economic recovery for awhile but, at some point, we are going to need to get a pick-up in jobs. We still see signs of progress in that direction but it’s clear that businesses are exhibiting an unusual degree of cautiousness in their hiring decisions. –David Greenlaw, Morgan Stanley
–Total nonfarm payrolls declined by 131,000 in July (the median forecast was -65,000), with the result suppressed by a 143,000 reduction in temporary Census workers… Non-Census payroll growth has averaged just 12,000 in the latest three months, which, no matter how you might try to spin it, is just plain lousy. –Joshua Shapiro, MFR Inc.
–While focusing on private payrolls alone does provide the best insight into the state of the business cycle, the danger is that the markets are ignoring the recent big declines in state and local government employment. State and local employment fell by 48,000 in July and there were 11,000 non-Census related Federal layoffs, meaning that the “true” ex-census gain in payrolls was actually only 12,000. July, which is the end of the school year, does appear to be a particularly bad month for state and local government layoffs. (Indeed, they shed 55,000 jobs in July last year.) Nevertheless, since the start of this year alone, state and local governments have reduced their workforces by 170,000, or nearly 1%. Further layoffs can be expected, even with the $26 billion in extra state aid passed by the Senate yesterday. –Paul Ashworth, Capital Economics
–The economy has added 654,000 jobs in 2010, but the sharpest gains were in March and April. While this is an improvement over this time last year, the rate of job creation remains less than about half of what it needs to be just to keep pace with population growth, let alone make significant progress on getting the unemployed back into jobs. The lack of increase in demand for temporary employees also indicates that employers are not feeling a need to ramp up hiring and provides a discouraging sign for the months to come. –Heather Boushey, Center for American Progress
–Since temporary employment is a short (3-month) leading indicator of the broader private sector trend , the recent pullback speaks to the possibility of a 2002-style interim period of stagnation within a broader recovery trend (and could be cited by double-dippers as evidence of something worse). In contrast to the 2002 experience, however, layoff announcements remain low, suggesting that the impact of the late-spring financial market sell-off will be to dampen the trajectory of labor market recovery, not to derail it. –Alan Levenson, T. Rowe Price
–The jobless rate held steady at 9.5%, although the flows on both sides of that calculation were poor. Household Survey employment contracted by -159,000, and the labor force shrunk by -181,000. The broader U6 jobless rate held steady at 16.5%. To lower the unemployment rate on a sustained basis, jobs must increase by more than 110,000 per month if the (depressed) labor force participation rate holds steady at current levels. It will take much more than that if the participation rate stages a cyclical rebound, and the “discouraged” and “marginally attached” eventually do come back to the labor force. –Jay Feldman, Credit Suisse
–Although some might take comfort in the jobless rate holding steady at 9.5% after a surprising 0.2% drop in June, the underlying details confirm our expectations that the temporary end of the emergency unemployment compensation program (EUC) would temporarily reduce the labor force. As it happened, the number of workers unemployed for more than 27 weeks fell by 179,000, accounting for virtually all the net decline in the size of the labor force. However, the overall count of unemployed workers fell by just 24, implying that the number unemployed who were not affected but the end of the EUC increased by about 155,000. Since Congress reinstated the EUC program through November and retroactive to June 2, we look for the labor ce and total count of unemployed to rebound in the months ahead though most of that rebound is likely to come in September and October. –David Resler, Nomura Global Economics
—The state of the labor market is poor. People are dropping out of the labor force. Even the temporary employment fell indicating the sorry state of the job market. Future employment gains won't be robust and the jobless rate will fall only slowly because businesses are more cautious about hiring at this stage of economic recovery compared to previous episodes. A double-dip is not likely, but not out of the question. Employers do not want to take chances. In an increasingly globalized economy facing steep competition, employers want to stay lean and mean. –Sung Won Sohn, Smith School of Business and Economics
–Private sector job and income gains are not weak enough to point to a renewed downturn, nor are they strong enough to suggest the recovery is free of such risk. –Stephen Gallagher, Societe Generale
–A disappointing employment report that points to a downshifting in the pace of private job creation and a further decline in labor force participation. Although private employment has risen in every month this year to date, the pace has slowed from a relatively solid 154,000 per month average from January–April to a mere 51,000 per month over the last three months. Although the hours worked data continue to outpace employment creation, we have also seen a slowing there from 2.7% in the three-months ended April to 1.8% in the latest three months. The news is a little brighter on the labor income front as a combination of a 0.3% increase in hours worked and a 0.2% increase in average hourly earnings points to a solid gain in labor income in July. Also good news was the pickup in employment in manufacturing and the solid increase in hours worked in the sector, which points to a respectable increase in manufactured output in the month. –RDQ Economics
–Job growth in the private sector was concentrated in manufacturing, which added a surprising 36,000 to payrolls, and services (38,000). This is the third consecutive sequential increase in services payrolls, suggesting some underlying momentum in services hiring may be taking place. Overall, although the headline numbers were well below consensus and net revisions were considerable, we continue to see a modest upward trend in hiring, which we expect to continue in the coming months. –Michael Gapen, Barclays Capital
–Manufacturing added a significant number of employees but most of them were in the vehicle sector. That may have been because fewer workers were cut this summer than normal due to the upheavals in the sector last year. Health care was strong but the financial and real estate sectors were weak. BP hired lots of people to help clean up the Gulf, retailers and wholesalers added to their payrolls but strangely temporary help firms placed fewer people. Another negative were the large revisions to previous month's gains. The one positive was a solid rise in hours worked, which when added to a modest increase in wages means income gains may be moderate. –Naroff Economic Advisors
–The recovery in the U.S. labor market clearly lost momentum during the second quarter… The deceleration is broad based and occurred in both service-providing and goods-producing industries. At the same time, the fiscal problems forced state & local governments to reduce employment at the fastest pace since the early 80s. –Harm Bandholz, Unicredit
–The end of the federal homebuyer tax credit has resulted in renewed weakening in the housing market. Construction payrolls are down, with losses concentrated in residential building, as are financial service payrolls, with the largest losses in real estate.–Sophia Koropeckyj, Moody’s Economy.com
–We remain confident that hiring will pickup over the second half of the year. Firms shed nearly 8.5 million workers during the downturn and (following hefty increases in productivity in 2009), companies have pretty much gotten all they can from their existing workforces. If the economy continues to expand, firms (enjoying strong profit growth and sitting on record levels of cash) will be forced to hire if they want to boost output to meet demand. –RBS
Dig into an interactive summary of economists’ forecasts for the coming year from the latest WSJ.com survey.
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