Second year of “economic recovery” not living up to expectations
Is there really any other way to describe Friday’s U.S. jobs report other than dismal? In case you were on holiday, the U.S. Bureau of Labor Statistics showed the smallest increase in employment since the end of the recession in June 2009. Two years after the official end of the downturn, the economy added just 18,000 jobs last month. The BLS also revised lower the estimates for April and May by 6½% to 217,000 and by 54% to 25,000, respectively.
The report was negative from just about every angle of approach. The official unemployment rate ticked up to 9.2% and the broader U6 unemployment rate hit a six-month high, 16.2%. More to the point, more workers dropped out of the work force; the labor force participation rate fell by 10 bps to 64.1%. Had this rate reverted to the long-run (non recession) average of 66.04%, then the true unemployment rate would be 11.9%.
Both the employment-to-population ratio and number of long-term unemployed (>= 27 weeks) fell to year-to-date lows, 58.2 for the former and 6.29 million for the latter. In other words, chances are real good that of those 418,000 Americans that filed for first time unemployment insurance last week, a sizeable portion of them will still be out of work by the time Christmas rolls around.
The average workweek for all employees in the private sector fell by 0.1 hour to 34.3 hours. Since the end of the recession the average workweek is 34.13 hours. During the recession (Dec-07 to Jun-09) the average workweek was 34.30 hours! On top of this, average overtime hours fell.
To add insult to injury, average hourly earnings for all private sector employees dropped by a penny to $22.99. As illustrated in today’s issue of , in May, retail gasoline as a percentage of hourly income hit the highest high, 17%, since the height of the recession. Therefore, it comes as little surprise the White House panicked last month with its decision to release barrels from the SPR.
Last, but not least, temporary employment fell. Keep in mind, since the end of the recession, temporary-help jobs were the go to metric used by pundits promising an imminent jobs boom. The theory being that employers would first turn to temporary workers before adding on fixed labor costs.
As detailed in over the last two years, the temporary employment indicator is a specious argument. Simply put, at the start of economic recovery the normal correlation between temporary and full-time employment breaks down, i.e. it takes place over a much longer time scale.
Bottom line, we are still in a jobs, not to mention housing, recession. In June the work week shrank, hourly pay shrank, overtime work shrank, temporary jobs shrank, the workforce shrank and unemployment rose.
Stephen Schork is the Editor of and has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.