The US economy continues to struggle. Monthly employment data is a key gauge of how the economy is faring, so markets always keep a close eye on it. And last Friday’s data proved to be yet another disappointment. Nonfarm payrolls shrank by 131,000 in July, while May and June’s figures were revised downwards. The result was distorted due to the hiring for the government census coming to an end, but private-sector hiring also fell short of expectations.
The unemployment rate stayed steady at 9.5%, down from a peak of 10%. But that’s only because people left the labour force, having given up the search for work. August’s report isn’t shaping up to be any better. Weekly initial jobless claims have ticked up again and temporary hiring has slid for the first time in ten months. As it stands, the economy is far from creating the 150,000 private-sector jobs needed to keep up with population growth and “help the recovery become self-sustaining”, says Joseph Lazzaro on Dailyfinance.com.
The worst downturn since the war and the feeble recovery have torn a deep hole in the labour market. Thirty months after a typical post-war recession starts, says David Rosenberg of Gluskin Sheff, payrolls are back above the previous peak. We’re still 7.5 million jobs, or over 5%, below the last peak. At this rate of job creation, we won’t get back to the peak for seven years. Almost half of the unemployed have been out of work for six months, a level not seen since the Great Depression. Even in good times, the long-term unemployed struggle to find work, says The Economist. Given the slow recovery, “America risks the creation of a class of the structurally unemployed”.
Companies “just don’t want to hire”, as Allen Sinai of Decision Economics puts it. Firms are unlikely to step up hiring significantly because consumers, whose spending comprises 70% of the economy, are “sitting on their wallets”. Consumers are unlikely to boost spending much as they’re concentrating on paying debt back, says Brian O’Connor of the Detroit News.
With the deleveraging process far from over, America’s labour market faces a long, hard slog. The latest data is a reminder that unemployment is typically very slow to fall after recessions caused by credit busts. The job market, says the Liscio Report, “is following the post-financial-crisis recession script all too well”.