That stubbornly high unemployment rate

By Felix Salmon
June 4, 2010
monthly payrolls report -- can in and of itself mark the beginning of the end of the recovery. But this month's numbers are still depressing, coming in well below lofty expectations, and having no silver lining: there were no upward revisions to previous months, there was no big fall in the unemployment rate, there was no obvious reason to believe that the 411,000 temporary employees hired in May to work on Census 2010 would otherwise have found private-sector employment.

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No single datapoint — not even the monthly payrolls report — can in and of itself mark the beginning of the end of the recovery. But this month’s numbers are still depressing, coming in well below lofty expectations, and having no silver lining: there were no upward revisions to previous months, there was no big fall in the unemployment rate, there was no obvious reason to believe that the 411,000 temporary employees hired in May to work on Census 2010 would otherwise have found private-sector employment.

The really recalcitrant number here is the unemployment rate, which is staying stubbornly near 10% no matter what payrolls do: when they’re healthy, more people start looking for work. But if you want a hint of a glimmer of hope, at least the broad U6 underemployment rate is heading in the right direction: it was 16.6% in May, down from a whopping 17.1% in April. (But it’s still higher than it was at the beginning of the year.) And more generally, of course, this degree of labor-market weakness is yet more reason to believe that inflation simply isn’t an issue for the foreseeable future, especially given the strength of the dollar. So the Fed is going to be happy keeping rates at zero for the time being: remember it has a dual mandate, and that Ben Bernanke should care just as much about bringing the unemployment rate down as Barack Obama does.

My feeling, however, is that both of them are going to be disappointed. Expect unemployment to remain over 9% through the midterm elections — compared to a rate of just 6.9% in November 2008, when Obama was elected. It’s that number, rather than anything going on right now in the Gulf of Mexico, which is really “Obama’s Katrina”.

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Comments
14 comments so far

This report should provide the “all is well” crowd with some fodder for thought.The reality is very different from what is being portrayed by the mainstream media.
http://Greenworldinvestor.com

Posted by AGreenInvestor | Report as abusive

Here’s a link to the employment trend for the last 10 years. As can be seen, its never a straight line. Keeping in mind that we are still coming out of a pretty bad recession, and things are getting dicey in the EU, and there is unrest all over the world, its a pretty decent report. If the coming months show bad numbers then its time to panic.

http://bit.ly/IzHzX

One more thing about the unemployment report, its unfair to compare the unemployment number to that in november 08 since BO just got elected. In Feb 2009 it was close to 9 %. Not only does BO and his team have to get all those who lost their jobs their jobs back, he has to create new jobs for those entering the work force for the first time. This is going to take a long time and people have to be pragmatic about that.

Posted by dicktracy150 | Report as abusive

The government “has to create new jobs”?

I’m not too keen on the sound of that.

Posted by Mega | Report as abusive

Open-ended Payroll Tax Holiday.

Want the private sector to create new jobs as rapidly as possible? Stop taxing employment!

Posted by Sensei | Report as abusive

The government doesn’t have to create jobs, they just have to stop doing things that create uncertainty, make businesses nervous and reluctant to take on new workers.

Posted by invention13 | Report as abusive

Regarding “has to create new jobs”, why is everyone blaming the admin for the unemployment rate then?

Posted by dicktracy150 | Report as abusive

Excuse me Mr. Dick Tracy150 I think Barry was sworn in as President in January 2009 unemployment was 7.6%. President Obama promised if we spent $865 billion dollars on the Democrat’s stimulus plan unemployment would hold steady at 8% He said his plan would save or create over 2 million jobs. Now over a year later we have lost over 4 million jobs, and stand at 9.7 % or higher without all the census jobs. I think the verdict has come in and it reads guilty of economic failure. Recycling failed Democratic and dare I say European socialist policies is obviously not the answer.

Posted by rightwingRob | Report as abusive

Mr rightwing, my post was more about the economy not being bad as everyone makes it out to be than about politics. As can be seen from the link that I posted, nonfarm jobs don’t go up in a straight line. In 2003 in November only 18 nonfarm jobs were added after 203 the previous month. So people need to stop being chicken littles and be more pragmatic.

Posted by dicktracy150 | Report as abusive

Our economy is seeing a fundamental shift: Manufacturing is moving overseas. So now we have a service economy, where people are trying to cheat each other.

What is the government doing to help? Instead of pouring cash into infrastructure, it spends borrowed money on census workers and unions and the lying Al Gores.

Just now, 150 school districts cut school week down to 4 days, instead of lay off teachers.

Indeed, people are trying to cheat each other. Nothing get built. And the biggest cheaters are government officials. Look at Greece and how they hid their accounting gimmicks.

How many more cheaters can this economy employ??? It will take a long time for unemployment to come down.

Posted by TheArtOfDiet | Report as abusive

We have a long way to go on unemployment. First the companies have to increase workers to full time, as a lot of people are working 4 days a week or took 10-20% paycuts so no one had to be fired. Then once they are busy enough for that, they will work them overtime for a while to make up lost wages and be sure its not a temporary bump in business. When people get burnt out on overtime, only THEN will we start to see increases in hiring. Plus I think a lot of companies have used this to trim the fat on a more permanent basis than we would like.

Posted by Wrathskellar | Report as abusive

To rightwingRob. The last decade of which the right wing was in charge was a lost decade of job growth. Why? Because the right wing successfully carried out class warfare, and created one of the most unequal democratic countries on the face of the planet. It’s laughable that the right wing cries like a baby about “socialist” tendencies from Obama, when in fact, we live under an oligarchy system controlled by the wealthy.

Posted by dcrimso | Report as abusive

ALL recessions are followed by several years of stubborn unemployment. Unfortunately, the Republicans in their cynicism being fully aware of this fact, have intended from the beginning of this economic disaster that they created, to exploit it to the fullest extent so they can get back in power and complete the plunder of the American people.

Posted by Dolmance | Report as abusive

70% of the long time unemployed are over age 45. Ok, Here’s a crazy, new idea: Instead of extended unemployment so that middle aged workers can wait it out another two years,collecting welfare and food aid, how about job training instead? Do you think the Obama administration would go for it, or is this concept too insane for liberals to comprehend?

Posted by writer6 | Report as abusive

As unemployment rate is decreasing in private sector according to household survey, as I’ve read in one of the blogs http://www.mikeastrachan.com/. It also said that rate is decreasing but in slower rate.

Posted by Nikkilarsson | Report as abusive
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