The economy lost 247,000 jobs in July, bringing the rate of job loss over the last three months to 331,000. This is down sharply from the 700,000 monthly rate of decline in the months from November to February. The unemployment rate actually slid slightly to 9.4 percent, although this was entirely attributable to people dropping out of the workforce. The employment-to-population ratio fell by 0.1 percentage points to 59.4 percent, four full percentage points below the pre-recession peak.
The slower rate of job decline is largely due to a moderation of the pace of job loss in manufacturing and employment services, two sectors that had seen employment plummet during the worst of the downturn. Manufacturing lost 52,000 jobs in July; by contrast, it lost 205,000 jobs per month between November and February. This improvement was, in turn, driven largely by the auto sector, which lost jobs at a rate of 30,000 per month in the winter plunge. By contrast, employment in the auto sector rose by 28,200 in July. This is entirely a seasonal story as unadjusted employment in the sector actually decreased by 8,600 in July. Workers who ordinarily would have been laid off for retooling in July had already lost their jobs earlier in the year.
The employment services sector lost 25,600 jobs in July, compared to an 86,000 monthly rate of job loss between November and February. Temporary jobs are always the easiest for firms to shed. The July data still shows that the direction is clearly negative, but the rate is far slower than in the months of free fall. Construction lost 76,000 jobs, with all sectors of the industry still shedding employment, although the pace is down from a 115,000 peak monthly rate.
The establishment data showed a modest 0.1 hour increase in the average workweek. This was driven largely by the 1.6 hour increase in the workweek reported in the auto sector. However, even though the increase may prove to be an artifact of seasonal adjustment, it appears that the length of the workweek has at least stabilized.
The picture in the household data continues to be mostly bad, but there were a few somewhat encouraging signs. Consistent with the rise in hours reported in the establishment survey, there was a decline of 198,000 in the number of people involuntarily working part-time. As a result, the U-6, the broadest measure of labor market slack, fell from 16.5 percent to 16.3 percent, the first drop since November of 2007.
There continues to be the extraordinary trend of increased employment among older workers in spite of the economic downturn, as employment among workers over age 65 increased by 11,000 in July, even as it fell by 166,000 for everyone else. Since November of 2007, employment of people over age 55 has increased by 957,000 even as it has decreased by 7,581,000 for everyone else. To some extent, this presumably reflects not only the desire of baby boomers to work later in life than the cohorts that preceded them, but also the need of older workers to secure health care coverage through employment.
One especially disturbing item was a jump of 0.9 percentage points to an unemployment rate of 12.6 percent for women who maintain families, the highest rate since the peak of the 1982 recession. While this rate peaked at 13.6 percent in early 1983, there are almost 80 percent more women who maintain families in the labor force today.
The increase in the average hourly wage was 3 cents, bringing the annual rate of increase over the quarter to 1.2 percent. The 14 cent reported rise in manufacturing wages accounted for more than half of the month’s increase.
Given the steepness of the winter decline, this report has to be viewed as positive news. The stimulus has worked in stabilizing the economy and ending the free fall. The main impact to date was felt through tax cuts and benefit increases which raised the annual rate of consumption in the quarter by roughly $100 billion, adding more than 2 percentage points to growth. However, without further stimulus, the economy will have excessive unemployment for years to come.
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