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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“If people are just giving up and removing themselves from the workforce, then a falling unemployment rate only serves to hide the bad news.”

I’m no economist, so could you explain to me why looking at the U6 wouldn’t answer that? Cause that dropped…

Posted by LorenzoStDuBois | Report as abusive

U6 decreased from 16.6 to 16.5. I think there was some seasonal adjustment done on the u-6 numbers that may have skewed it a little bit.

Posted by dicktracy150 | Report as abusive

There is no economic recovery, and there won’t be until businesses and those with enough income re-invest their profits instead of hoarding them. The government spending programs are only transient (unless they are true investments, but most aren’t), and will not sustain a recovery.

The amount of cash being held by businesses in the US is at an all-time high. The fear of a recession has become a self-fulfilling prophecy, and until businesses are forced to re-invest profits by a tax policy that rewards investment, rather than one that just rewards profits, there will be no recovery, only noise generated by spiraling public debt.

Employment is not increasing because businesses refuse to re-invest their profits. Change that and you will see increased employment.

Posted by OnTheTimes | Report as abusive

People are wise not to either spend or invest here in the USA.

Our economic system has failed badly and no one in power wants to do anything except window dressing. In the absence of some reforms to change the flow of things millions more jobs will leave the USA over the next few years, production within the country will continue to fall, and the standard of living deteriorate. The neglect of fundamental reforms to build a viable system here will probably result in an emphatic repudiation of the free market / free trade system and things will get worse yet. And we will get treated to more Republican rantings trying to find someone else to blame for a rejection of capitalism in the USA.

Fix it or kiss it good-bye, people.

Posted by txgadfly | Report as abusive

there is the Detroit model..the bankster beast is starved but the people eat..actually the Cubans and the Russians have a lot of experience with economic collapse and what it takes to get by..better find out fast..

Posted by gramps | Report as abusive

What makes me ill is that this is all a result of the policy makers following the directives of economists (who in turn were giving an academic gloss to the wish list of CEOs): more deregulation, more globalization, more “free trade”.

And for years we were told that American workers would ‘climb the value chain’ and all be better off. It was fine if we dumped manufacturing, we could all be programmers. It was fine if we sent programming to India, because we could all be … outsourcing managers. Or something.

Wow, economists: you blew it. Let me say, you have lost your credibility, with a few stellar exceptions.

Wow, CEO’s: you blew it. Let me say, when you deliver one of your lectures on our declining competitiveness or burdensome regulation, blah blah blah, my eyes roll.

You guys turned this whole country into your personal cafeteria, then wrecked the place.

Posted by nyet | Report as abusive


Many companies and small businesses are barely hanging in there, with no profits to re-invest in anything.


Are you still buying the recovery story?

Posted by yr2009 | Report as abusive

Its funny that someone writes this article now rather than during 2001-2007. This same phenomenon was going on then when all the news media were crowing how great the economy was under Bush when the unemployment rate was supposedly low. Us ordinary working “Joes” knew based on our real income erosion that the economy was being hyped. Structural unemployment has been a dirty secret since the Reagan Administration. It would be nice if the Bureau of Labor Statistics was not under the Executive Branch so that we all could see the real main street health of the economy.

Posted by armoderate | Report as abusive

I think it’s indicative of the major loss of confidence by the American People in their elected officials and business leaders. The sooner our wonderful leaders, business and political, internalize this the sooner we get started solving some of America’s real problems.

Posted by Woltmann | Report as abusive

nyet…I agree with your posting…nothing to add here except a joke. If you took all the economists in the world and laid them end to end, they still wouldn’t reach a conclusion.

Posted by SkepticOne | Report as abusive

@yr2009, yes, many companies are in no position to invest, but there a lots of big companies whose earnings have recovered due to reductions in payrolls and inventories, and they are not re-investing those earnings.

The WSJ, which regularly rails against federal spending to keep the economy from entering a death spiral, reported on the record hoarding (http://online.wsj.com/article/SB1000142 4052748704312104575298652567988246.html) . However, they are not able to connect the dots between large, healthy, profitable businesses reluctance to invest and the weak economy. I guess they still believe in the magic of the market, because if bonus-driven executives don’t want businesses to spend, and they don’t want the government to spend, I don’t know how they expect any economy to maintain its status quo, let alone grow to meet a growing population.

The economy is a national asset, and needs maintenance to remain valuable to the nation (and world). That maintenance is the renewal of investments and recycling of profits. In the absence of maintenance, all assets deteriorate and ultimately lose their value. That is what is happening now.

Posted by OnTheTimes | Report as abusive

Why would companies invest when Washington can just turn around and change the rules mid-stream, or find another set of corporate scapegoats of which to make an example, or raise taxes willy-nilly or whatever? Face it, you all elected Mr. Obama and now many of you are suffering from buyers’ remorse. Do something about it in November before it’s too late.

Posted by Gotthardbahn | Report as abusive

uh, it’s not the government.

if companies are sitting on cash, they can just as well invest overseas. (not a bad idea to do while the dollar is high — let’s get rich owning the rest of the world.)

the issue is that nobody wants to invest when current fixed investments are running only at about 75% capacity. we’ve got a dearth of demand, plain and simple, end of story. a little inflation would cure this right quick.

Posted by q_is_too_short | Report as abusive

q: A little inflation would see bond yields back up a LOT. Seeing as Uncle Sam will run a deficit this year of around 1.6 trillion and the current national debt is, what, 10-12 trillion or so, even a couple of basis points higher in yield would be ruinous in terms of interest payable, so a little inflation isn’t really an option.

When I write that Washington is the problem, it is in the sense that the Obama administration is apparently obsessed with changing all the rules governing business and employment – under the catch-all term of ‘reform’ – but what is not generally recognized is that the private-sector experience of the current administration is pathetically low. The uncertainty generated by Obama results in employers holding off on hiring and expanding, not knowing if Team Obama will change something else resulting in higher costs. The lack of private-sector experience of Team Obama means they really don’t understand, or even care, what impact their changes have on business. Mr. Immelt of GE, among others, has touched upon this in recent months.

Bottom line, clipping Mr. Obama’s wings in November means a reasonable degree of certainty for business going forward. A poor showing by the Democrats in November, which seems likely given the poor employment numbers recently released, will ensure a do-nothing/nonmeddlesome Congress and an improving economy in 2011. So get out and vote!

Posted by Gotthardbahn | Report as abusive

Yeah, vote out the Democrats, because when Obama was elected in 2008, the economy was humming along and the U.S. financial system was the envy of the world.

Businesses are not reducing investment because of government policies; they are cutting back because they believe the economy is weak. And because they are cutting back, the economy is weak. If they had confidence that the economy would grow, they would be investing, and amazingly enough, the economy would grow. Because there would be enough investment to make it happen.

Posted by OnTheTimes | Report as abusive

What worries me probably the most in this crisis are 2 things:
1). Why do especially Americans keep spending borrowed money.
Some stimilus might be a good idea but making all sorts of commitments for healthcare, wars etc??

2). The other one is that imho:
- It is pretty clear that a crisis triggers outsourcing from high wage countries.
- Combined with sharply rising education levels in the EM’s.
- And considerable groups not able to meet qualification requirements for a high wage enviroment in the Western world.

Make structural unemployment rise quickly.
However you don’t see any real long term policies to attack this problem, allthough it will likely lead to considerable lower wages (middle and especially lower) sector and more people on welfare. The latter leading to increased taxes or halving welfare payments.

Bush was not able or willing to do something against this trend and it looks Obama is neither (No he cann’t!)

Posted by Rikh | Report as abusive

Another case of lies, damned lies and statistics, I think: definitions, workforce sizes, manipulating sectors….all governments do it. They call it spin, but actually it’s lies.

There are two fascinating commonalities between the US and UK at present.
First, neither private sector can soak up the public sector jobless. And second, everyone talks about ‘double dip’, when it’s hard to see any sign in the real data that anything went up in the first place without massive QE.

There is a third area too – massive debt. So we’re both between a rock and a hard place.

This is a great blog by the way, Felix – not just well-informed, but very creative in its interpretations.
Keep up the good work.

Posted by nbywardslog | Report as abusive