Unemployment rate shows US 'upturn is nothing great'
Unemployment rate watchers noted that summer is traditionally a slow season for hiring, but the economy continues to show signs of slow progress. The unemployment rate stayed at 9.5 percent in a jobs report issued Friday.
It now appears this will be a disappointing summer for people looking for a job.
There was a reduction of 131,000 jobs in July the US, according to the Bureau of Labor Statistics. Many of the layoffs were the result of part-time census workers who had completed their work. But, the private sector failed to kick in with much in the way of new hiring – adding 71,000 new positions.
The BLS reported the unemployment rate remained unchanged from June at 9.5 percent, mainly because 181,000 people dropped out of the labor force and so no longer count against the jobless rate. Most of these people have likely given up on looking for a job out of frustration, economists say.
This report, some economists say, indicates the economy is continuing to grow but at too slow a pace to create a lot of new jobs. However, economic analysts don’t think this report will spur the Federal Reserve, which meets next Tuesday, to begin any significant new interest rate-reduction or economic stimulus programs.
“The implications of this report is that we are moving forward, we are not in a double dip situation,” says Joel Naroff of Naroff Economic Advisors in Holland, Pa. “But this modest job recovery is indicative of the fact the upturn is nothing great.”
Summers are traditionally not the strongest time for hiring, which often picks up in the fall or early winter. In June, the total non-farm payrolls dropped by 221,000, once again because many part-time census workers had finished their work. August is not expected to show major gains because it’s the time of year when many municipalities begin to implement their new budgets, which this year are shrinking.
In fact, according to the web site, DailyJobCuts.com, many municipalities are beginning August with pink slips. For example, Dallas is laying off 500 workers; Neosho, Mo., will shed 22 police and fire fighters; and Romulus, Mich., says it may have to layoff 32 police, firemen, and emergency medical services personnel to balance its budget.
Senate passes jobs bill
Republicans quickly jumped on the disappointing July employment numbers. House minority leader John Boehner called the report “another disappointing report.” He added: “It’s time for President Obama to listen to the American people and face up the fact that his ‘stimulus’ policies aren’t working.”
At noon, Mr. Obama made a statement about the economy at Gelberg Signs, a Washington small business that is adding workers.
“The road to recovery does not follow a straight line,” said Obama, who noted the private sector has added jobs for seven consecutive months. But Obama added new jobs are not coming nearly fast enough. “We need to speed our recovery so it reaches people now,” he said, promoting his plan for a jobs bill for small business.
Reasons for cautious optimism
Some economists believe the slow hiring in the private sector is the result of some temporary factors that may improve in the months ahead. For example, Congress did not renew the housing tax credits and the tax credit for purchasing energy efficient appliances. Since then retail sales have been lackluster, observes Richard DeKaser of Woodley Park Research in Washington.
“If the reason they are weak is tax and benefit related, we have reason to be optimistic,” says Mr. DeKaser. “The declines are just temporary pot holes following the diminished use of tax incentives.”
DeKaser says the slower US economic activity also coincided with the financial crisis in Europe. Since July he notes the concern over the possibility of European defaults has diminished.
“My interpretation is that the slowdown reflects factors that are unlikely to persist,” says DeKaser.
In fact, this week the Institute for Supply Management reported its service sector-index rose more strongly than expected in July. At the same time, a survey by the accounting firm KPMG found 45 percent of US manufacturing executives said they expected a “significant” hiring pickup in their firms in the next 12 months compared with 34 percent in February.
“That’s a pretty substantial leap,” says Mike Nolan, head of US and global risk and compliance at New York-based KPMG. “Our survey indicates positive momentum, and I think the key message is that there is sustained optimism leading to increased confidence. So, when I look out 12 months, I see increased hiring.”