Manufacturing Job Slump Spreads to Overall Employment

In August, 4,000 jobs were eliminated in the overall economy, according to the employment report, released by the Bureau of Labor Statistics (BLS). Generally, about 150,000 new jobs are needed each month to keep the economy stable, so this was of great concern.

Fortunately, the unemployment rate remained at 4.6%. This is in the same range it has been in since September 2006.

Year-over-year employment also looks bleak.

1. Jobs increased by only 1.2%, the weakest job growth since 2004.
2. This is similar to the trend in manufacturing jobs, which have been steadily declining since last October. In August, there were 1.5% fewer manufacturing jobs than the year before.

Manufacturing jobs are a good leading indicator of overall economic performance, since they produce big-ticket items that consumers will put off buying when the economy starts to weaken. As the orders decline, manufacturers will hire less workers, and even lay off existing workers to keep costs low. (Source: BLS, Employment Situation Summary)

What This Means for You

Lower employment growth means less income to fuel consumer purchases, which is 70% of the U.S. economy. Over the long haul, this will cause the economy to continue its softening trend. Now would be a good time to defer new large purchases, and pay down debt -- just in case. The next employment report will be released October 5, so check back then.

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