Magazine article Economic Trends

The Employment Situation, May 2009

Magazine article Economic Trends

The Employment Situation, May 2009

Article excerpt

06.05.09

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Employment losses moderated in May, as nonfarm payrolls dropped by 345,000, much less than the average loss of 643,000 of the prior six months. This was the smallest payroll decline since September 2008, and revisions to March and April lessened those months' losses by a total of 82,000. The moderation was driven by fewer losses in construction; trade, transportation, and utilities; and professional and business services, as well as larger gains in education and health.

The unemployment rate, however, continued its rapid ascent, climbing 0.5 percentage point to 9.4 percent, its highest since 1983. Although May's job losses were far lower than expected, the additional 345,000 brings total losses this recession to 6.2 million.

The Diffusion Index of Employment Change, which tracks the percentage of industries with increasing employment, made its largest jump since September 2007 and now sits at 32.7. However, it still implies that only 32.7 percent of industries are expanding employment, and the rest are laying off or holding their own.

Goods-producing payrolls dropped by a more moderate 225,000 in May, owing entirely to smaller losses in construction. The construction industry shed just 59,000 jobs, a much smaller number than the 108,000 of the month before. The improvement applied to both residential and nonresidential construction. Manufacturing losses stayed roughly the same at 156,000.

Job losses in service-providing industries were cut in half last month to 120,000. Industries responsible for this improvement were trade, transportation, and utilities; professional and business services; education and health; and leisure and hospitality. Trade, transportation, and utilities lost only 54,000 jobs in May compared to April's loss of 115,000. Retail trade losses were halved (17,500) in the sector's best month since June 2008. Professional and business services dropped 51,000 payrolls compared to the previous month's 111,000, and leisure and hospitality had its first positive report since the beginning of the recession, contributing 3,000 jobs.

Education and health, the only industry that has not experienced a net job loss this recession, had its best month since November, adding 44,000 jobs. Losses in financial activities lessened to 30,000 over the month, but losses in information increased slightly to 24,000. The government sector, which typically makes positive contributions to the employment picture, actually lost 7,000 jobs last month compared to a large 92,000 gain in April.

Despite the many brighter spots in this report, the unemployment rate shot up by a more-than-expected 0.5 percentage point all the way to 9.4 percent. The number of unemployed workers rose by 787,000, and the employment-to-population ratio, which had held steady at 59.9 percent in April, slipped 0.2 percentage point to 59.7 percent. Both the unemployment rate and the employment-to-population ratio are at levels not seen since the mid-1980s.

Labor Market Conditions and Revisions

                                         Average monthly change
                                        (thousands of employees,
                                                 NAICS)

                                        2006       2007     2008

Payroll employment                       178        96      -257
  Goods-producing                         5        -34      -126
    Construction                         15        -16      -57
      Heavy and civil engineering         3         0        -6
      Residential (a)                    -5        -23      -35
      Nonresidential (b)                 16         6       -16
    Manufacturing                        -14       -22      -73
      Durable goods                      -4        -16      -54
      Nondurable goods                   -10        -5      -19
  Service-providing                      173       130      -131
    Retail trade                          3         14      -44
    Financial activities (c)              9        -10      -19
    PBS (d)                              45         25      -63
      Temporary help services             2         -7      -44
    Education and health services        39         43       43
  Leisure and hospitality                33         21      -21
  Government                             17         24       14
  Local educational services              6         8        1
                                       Average for period (percent)

Civilian unemployment rate               4. … 
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