Private Sector Job Growth Sluggish in May

Hopes for a continued strengthening of job growth in the private sector received a setback with the release of today’s employment report from the Labor Department. Private employers, many of whom continue to shed jobs as part of ongoing cost-reduction schemes, were only able to increase their overall employment by a net 41,000 in May. But 31,000 of those jobs were in temporary services, according to the report’s employer survey.

Total employment grew by 431,000 in May, with the addition of 411,000 temporary U.S. government Census workers. State and local governments shed 21,000 jobs last month, reflecting continued severe budget shortfalls caused by recession-induced revenue declines.

The small gain in private employment came after an increase of 218,000 private sector jobs in April and 158,000 in March. The overall unemployment rate declined from 9.9 percent to 9.7 percent, the same rate it was from January through March.

The manufacturing, transportation and warehousing, and health care sectors all posted modest jobs increases. But construction, retail trades and financial services showed net job losses.

The total number of unemployed was little changed at 15 million, a number that has been fairly constant going back to last summer. The .2% decline in the unemployment rate was due to a reported 322,000 drop in the size of the labor force, perhaps an anomaly in the household survey data.

Among the unemployed, the average duration of unemployment increased to 34.4 weeks. Long-term unemployment continued to rise, setting yet another new post-war record. The number of Americans unemployed for 27 weeks or more increased by 47,000 to 6,763,000 — representing 46 percent of all the unemployed. Another troubling statistic emerged in the duration of unemployment data: those unemployed for less than 5 weeks increased by 70,000 workers.

A summary from reactions to today’s report follows:

The Economic Policy Institute:

“These new data do not present a picture of a healthy private sector and offer nothing even closely resembling the job growth we need to dig us out of a very deep hole,” said EPI president Lawrence Mishel.

The vast majority of May’s new jobs (411,000, or 95%) were temporary Census jobs that will disappear over the summer. The private sector saw very modest growth, adding just 41,000 jobs, much slower than the average growth of the previous three months, which was 146,000.

An ongoing concern is the size of the gap in the labor market. To put it in perspective, consider the following: in the boom of the late 1990s, the fastest year of employment growth was 2.6%, in 1998. If, in the event we have that extremely strong level of growth from here on out, we would still not get down to pre-recession unemployment rates until January 2015. The hole in the labor market is staggering, unemployment remains near 10% and long-term unemployment continues to break records.

“Given this uninspiring employment picture, the economic case for substantial additional government action to aid the long-term unemployed and to generate jobs remains overwhelming,” said EPI economist Heidi Shierholz.

Dean Baker at the Center for Economic and Policy Research:

Excluding the temporary Census hires, the economy has generated 132,000 jobs a month over the last three months, just a bit more than the amount needed to keep pace with the growth of the labor force.

This report is a clear warning that the recovery is very weak. The weakness is in spite of the temporary stimulus provided by the hiring of 550,000 Census workers. With house prices falling again, severe state and local budget cutbacks looming, and troubles in Europe dampening exports, the future is not bright.

Meteor Blades at Daily Kos:

Today’s eagerly anticipated jobs report from the Department of Labor fell far short of expectations, once again raising serious questions about the sustainability of the recovery that began in the third quarter of 2009. The total job increase was 431,000, but private-sector hiring hit a disappointing 41,000 jobs, far less than the 180,000 median prediction of 82 experts surveyed by Bloomberg. Some of the experts had predicted as many as 750,000 jobs would be added.

Given that stimulus spending will fade sharply in the third and fourth quarter, it’s now up to the private sector to sustain growth in employment. Experts, including many Fed bank branch presidents, have been saying for months that a tepid economy was in the works.

Meteor Blades added this chart among the comment replies:

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One thing we can expect is that the Republicans will take glee in the devastating weakness of today’s report. They’re always on the lookout for whatever they can use against the Democrats, even when it means continued misery for millions of Americans. And what do they offer an alternative to current policies? Deficit cuts, more shredding of the safety net, lower taxes for their gated-community pals, obstruction on extending unemployment benefits. Unfortunately, many Democrats have joined the chorus for deficit cutting and knocking big chunks out of measures designed to help the 15 million Americans who are officially out of work.

(That’s the “Dangerous Crossroads” I described here three days ago.)

The Center on Budget and Policy Priorities:

Today’s jobs report shows a labor market that has turned the corner and is creating jobs but one with a long way to go toward a full recovery from the devastating job losses of 2008-09. The percentage of the population with a job is generally moving in the right direction but remains at a very depressed level (see chart).

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Unemployment is still very high, and jobs are still hard to find.

Under these circumstances, policymakers should have no qualms about passing a robust jobs bill — indeed, they would be derelict not to. Unemployed workers struggling to find a job need the help, and based on current forecasts of relatively weak economic growth for the rest of the year, the economic recovery could really use an additional boost.

The AFL-CIO:

AFL-CIO President Richard Trumka said the low number of private-sector jobs is further evidence the recovery is still fragile.

“The Economic Recovery Act saved us from a second Great Depression, but it was not sufficient to power strong and sustained job growth, and its effects are expected to wane in coming months.”

He called on Congress to do more to create jobs and sustain the recovery.

“Most immediately, Congress must move quickly to restore health care benefits for the unemployed and provide aid to states to maintain jobs and vital services. We already see state and local governments shedding 22,000 jobs in May. Without further action to offset state budget shortfalls, these job losses will offset temporary gains from federal spending.”

Christina Romer, chair of the President’s Council of Economic Advisers:

Payroll employment rose for the fifth month in a row, and the unemployment rate fell two-tenths of a percentage point to 9.7 percent. While these are encouraging developments, we clearly have a very long way to go until the labor market is fully recovered. It is essential that we continue our efforts to move in the right direction and generate steady, strong job gains and continuing declines in unemployment.

The fact that the unemployment rate fell and private employment rose are obviously encouraging signs that recovery continues. At the same time, the continued high level of unemployment and the slowdown in private sector job growth emphasize the need for continuing vigilance. The Administration strongly supports targeted actions to spur private sector job creation and prevent continued reductions in state and local government employment. Tax incentives for clean energy manufacturing and energy efficiency, extensions of unemployment insurance and other key income support programs, a fund to encourage small business lending, and fiscal relief for state and local governments are essential measures to ensure a more rapid, widespread recovery.

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