Employment falls

By Felix Salmon
July 2, 2010
today's drop of 125,000 in the total-employment number. That said, however, it is reasonably encouraging, in context: many more people than that were laid off from their temporary census jobs, to employment ex-census went up.

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It’s never good when employment falls during what’s meant to be an economic recovery. It’s worth remembering that, if people start getting excited about today’s drop of 125,000 in the total-employment number. Yes, private-sector hiring was marginally positive, by 83,000, but we’d all like to see much bigger numbers than that.

Unemployment dropped sharply, to 9.5%. But why? It doesn’t seem to be thanks to people getting jobs: after all, employment fell. And the labor force participation rate — the number of employed people divided by the total number of people capable of working — hit another new low today, of 64.7%. If people are just giving up and removing themselves from the workforce, then a falling unemployment rate only serves to hide the bad news. What’s more, the only important statistical decline in the unemployment rate was among white women, who already have lower unemployment than just about anybody else. The rest of the country — including, crucially, men overall — was pretty much unchanged.

As far as markets are concerned, however, this report had better be good. Shrinking employment and 9.5% unemployment are nobody’s idea of a healthy economy, but as Barry Ritholtz notes, “whisper numbers” for today’s payrolls report have been extremely gruesome and have contributed to the big sell-off in recent days. If the bearishness continues in the wake of these payrolls numbers, the message from the markets is that there’s still really nobody out there looking for an excuse to spend money — either on equities or on employees.

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