Measured any which way, U.S. job growth turns dismal

Even those who don't usually follow economic indicators could not ignore the dismal news about U.S. job growth for August.  Headlines and media commentary blasted the message that the nation added no new jobs for the month.  With four months of data yet to come in, it seems that the best that can be expected from U. S. labor markets would be a gain approaching one percent for the year.  This would be a welcome increase, but still not enough to reduce unemployment below the 9.0 percent level. To be clear, there were in fact some new jobs created in August: netting out the job gains and losses, the latest jobs report brought no new jobs overall for the month, and a gain of only 17,000 private sector jobs.  

Even those who don't usually follow economic indicators could not ignore the dismal news about U.S. job growth for August. Headlines and media commentary blasted the message that the nation added no new jobs for the month. None. Nil. Zero. Naught. Zip. Zilch. Seasonally adjusted employment was 131.1 million in July and was unchanged in August. To be clear, there were in fact some new jobs created in August. Health care grew by 30,000 jobs, and the economy added 16,000 professional and technical service jobs. But these and other gains were offset by decreases elsewhere, including 47,000 in telecommunications (due to the Verizon strike) and a decline of 17,000 in government jobs. Netting out the job gains and losses, the latest jobs report brought no new jobs overall for the month, and a gain of only 17,000 private sector jobs. The largest month-to-month increase so far this year was in February, when 235,000 jobs were created (see Table 1). But the average monthly gain for the past four months is 53,000 jobs, dismal in an economy plagued by high unemployment and a sluggish consumer sector. Analysts often point out that at least 125,000 new jobs are required each month just to absorb new entrants into the labor force.

Table 1: Monthly Growth in U.S. Jobs (thousands)

Source: U.S. Bureau of Labor Statistics, seasonally adjusted nonfarm jobs

Jobs increased by 1.3 million in the past 12 months

Of course, month-to-month changes are just one way of looking at job creation. An alternative is to compare the level of employment in a given month with the same month in the prior year. This approach provides some evidence on how the economy is doing compared to one year ago (see Table 2). The August figure is slightly stronger than July but weaker than March and April.

Table 2: Monthly year-over-Year Growth in U.S. Jobs (thousands)

Source: U.S. BLS, not-seasonally adjusted nonfarm jobs

Since dipping in May, over-the-year employment has been up by more than one million jobs in each subsequent month. The over-the-year gain was enough to bring the unemployment rate down to 9.1 percent from 9.6 percent in August of last year, but the unemployment rate is up from 8.8 percent recorded in the early spring when job growth was better. The growth in private sector employment is much stronger, with private jobs up by 1.7 million in August of 2011, compared to last year. But the government job losses over the past 12 months (federal, state, and local) add up to a sizeable 462,000, which are subtracted from the total.

Year-to-date growth is less than one percent

When the figures are eventually tabulated to evaluate the labor market performance of the U. S. economy for 2011, monthly changes will be set aside and supplanted by annual figures, as the percentage and absolute increase in jobs will be looked at for the year as a whole. Annual employment is computed by averaging the monthly employment levels for the entire 12 months of the year. A running indicator of the ultimate annual growth figure is the year-to-date approach to measuring employment gains. As of April of 2011, for example, employment was 0.94 percent greater than over the same period of the previous year (see Table 3). But in May, year-to-date employment gains slumped, and by mid -year, monthly jobs were up only 0.9 percent over the first half of the previous year.

Table 3: Monthly Year-to-Date Growth in U.S. Jobs (percentage)

Source: U.S. BLS, not-seasonally adjusted nonfarm jobs

Although employment was unchanged in August compared to July, it did not decline overall. The year-over-year and year-to-date figures in August were very modestly improved over July. But with four months of data yet to come in, it seems that the best that can be expected from U. S. labor markets would be a gain approaching one percent for the year. A one percent increase would be 1.3 million jobs, a welcome increase, but still not enough to reduce unemployment below the 9.0 percent level.

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