Magazine article Economic Trends

Treading Water

Magazine article Economic Trends

Treading Water

Article excerpt

09.02.11

August's employment report showed that the labor market is treading water. Payroll employment showed no change in August, and the unemployment rate remained stuck at 9.1 percent. Private payrolls expanded by a very modest 17,000 jobs, which was offset by a contraction in the government sector of 17,000, attributed mostly to declines in local government education (-13,700). Since the end of the recession, state and local government employment has declined by 603,000 workers or -3.1 percent, a clear reflection of the stress on state and local government budgets.

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Part of the weakness in the current month's private-sector payroll data is transitory, as a strike by workers in the telecommunications industry reduced employment by 45,000. The strike occurred during the data collection week of August 8 to 12, but the workers involved have subsequently returned to work. Still, across the board, the numbers were very weak -- most private industry sectors showed little change in employment, with very modest gains in health care and professional services. To put an exclamation point on the anemic nature of the report, both June and July were revised downward, with a collective reduction to payroll employment of 58,000 jobs. Thus, over the last three months, employment gains have averaged a mere 35,000 workers--a rate well below what is required to bring down unemployment.

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Nothing else looked strong from the payroll side of the report. Average weekly hours declined, and the Bureau of Labor Statistics' (BLS) overall index of aggregate hours actually fell. This index incorporates both changes in employment and changes in hours, so it reflects overall labor utilization in the economy. Indeed, this index shows that aggregate labor hours are below those seen in April 2011, illustrating the general weakness of the labor market over this past summer. On the compensation side, hourly wages and weekly earnings declined, as well.

The weakening trends in payroll employment growth are seen in the BLS' diffusion indexes. These indexes measure the percent of industries expanding their employment. The indexes provide an indication of how broad-based employment gains or losses are across industries. A value of 50 implies that the number of industries expanding and the number of industries contracting is essentially balanced. The three-month and six-month indexes measure changes over the last three-month and six-month intervals, respectively. …

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