Job Growth Stalls
Friday, June 1, 2012
CMC UPDATE: Job Growth Stalls
Abdur Chowdhury, Ph.D. Chief Economist
The U.S. economy created a scant 69,000 jobs in May. Made worse, revisions cleaved off 49,000 jobs from the prior two months. Private sector jobs were up 82,000 with job gains concentrated in education, health, trade and transportation. Jobs gains in other sectors were unremarkable, with the construction sector losing 28,000 jobs in the month. The unemployment rate edged up to 8.2% in May from 8.1%.
We now have three disappointing monthly payrolls reports under our belts, and first quarter GDP growth was less than expected. Pessimists will focus on the loss of momentum in hiring, but we see the current levels as consistent with the sub-par growth we are seeing in the economy. Given economic growth of 1.9% in the first quarter, the +250,000 job growth in January and February was the real anomaly.
Long-term unemployment and a declining participation rate are of concern, as evident in the continued high level of the median duration of unemployment and the lowest participation rate since 1981. While the extension of unemployment benefits has some influence on unemployment duration, the larger and structural issue is that many workers do not have the skills required by employers in the location where employers are seeking jobs, causing long spells of unemployment or a withdrawal from the labor force.
In an economic recovery that lacks a strong foundation, ripples of uncertainty can make a big splash on business and consumer confidence. Already, there have been a couple of disconcerting trends trickling into the labor market outlook. Aside from the deterioration in consumer confidence in May, jobless claims are edging up. Neither one is of significant magnitude to suggest the bottom will fall out from employment, but both support the notion that we could see persistence in soft job gains as uncertainty builds abroad and on the home front due to a precarious Europe, a still moribund housing market and increasing government cutbacks.
Dr. Abdur Chowdhury is the Chairman of the Department of Economics at Marquette University, the Chief Economist at Capital Market Consultants, Inc. (CMC) and a member of the Federal Reserve Board of Chicago’s Academic Advisory Council. CMC is located in Milwaukee and provides capital market, investment manager and economic research to Ellenbecker Investment Group. For more information about Capital Market Consultants, Inc. see their website at cmarkc.com.
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