Jobs report raises new doubts about economic recovery
Only 41,000 New Jobs Created by Businesses in May
San José, CA – On June 4, the Department of Labor reported that there were 431,000 more jobs in May than the month before. But almost all of these new jobs were temporary workers hired for the 2010 Census. Only 41,000 jobs were added by businesses, down sharply from the 218,000 private sector job gain in April. This number was far worse than the 150,000 new jobs that economists expected private businesses to add in May. And of these 41,000 new private sector jobs, 31,000 were temporary help service workers. Despite the job gains this year, the economy is still down some 8 million jobs since the recession began in December of 2007.
The official unemployment rate also fell from 9.9% in April to 9.7% in May. But this was because more than 300,000 people stopped looking for work and thus are not counted by the government as unemployed. The total number of unemployed – people working part-time because they can’t find full time work and those who didn’t look for work but would like to work – stayed high, at more than 16%. The official unemployment rate for African Americans and Latinos stayed high, with both groups having double-digit rates at 15.5% and 12.4%, respectively.
The May jobs report was another sign of how dependent the economy is on federal government spending. Without the hiring for the Census, there would have only been 20,000 new jobs, since the 41,000 private-sector jobs that were created were partially offset by more than 20,000 jobs lost at state and local governments, as they face mounting budget deficits. With the Census work expected to start winding down this month, there are likely to be overall job losses in June.
Another sector of the economy that is very dependent on federal government stimulus is the housing market. With the end of the federal home-purchase tax credit on April 30, home purchases plummeted in May. The Mortgage Bankers Association index of mortgage applications for home purchases dropped 40% in May from April levels, to a new 13-year low.
The May jobs report also highlighted the continued rise in long-term unemployment. In May, the typical (median) unemployed worker had been out of work for more than 23 weeks. 46% of the unemployed had been out of work for more than half a year, the highest rate since the Department of Labor began to collect this statistic in 1948. This rate is almost twice as high as any other recession following World War II.
The continued rise in long-term unemployment, combined with the painfully slow increase in jobs, raises the likelihood of a growing number of permanently unemployed Americans. Western Europe has had high unemployment rates for almost 30 years. This was typically blamed on the extensive social safety net of unemployment and health insurance of those countries. But the rising numbers of long-term unemployed here in the United States, where the safety net has always been relatively weak and getting weaker, raises another possibility: that high unemployment rates and rising numbers of long-term unemployed is a feature of modern capitalism.