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Kimberly Amadeo

Jobs Report Encouraging

By August 6, 2012

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The Dow added 217 points after the July Employment Report was released on Friday by the Bureau of Labor Statistics. Economists had forecast a 100,000 job gain, so investors were elated when the economy added 163,000 jobs. The unemployment rate rose a tenth of a point to 8.3%, basically staying in the same range it's been in all year.

The most job gains occurred in the following sectors:

  • Leisure and hospitality -- 27,000 vs 10,000 jobs in June.
  • Health care -- 19,100 after adding only 9,500 last month.
  • Auto industry -- 12,800 vs 7,100 in June.
  • Retail trade -- 6,500 jobs, after losing 3,200 in June.

Temporary help added 14,100 jobs, still quite a bit, but less than the 21,100 positions added last month. This could mean that employers are feeling a little more confident about the economy, enough to add more permanent payroll positions.

Government is still shedding jobs, but the pace is slowing. Only 9,000 local, state and Federal public jobs were lost, the same as in June but much less than the 79,000 government jobs lost in July 2011.

The unemployment rate rose a bit, from 8.2% (where it's been since March) to 8.3%. If jobs are being added, why would the unemployment rate rise? First, the unemployment report comes from a household survey, while the jobs report comes from a business survey. Therefore, the two reports don't always tie out. Second, the unemployment report is not quite as accurate as the jobs report. Therefore, most analysts pay attention to the trend reported by the business survey if it conflicts with the household survey.

The unemployment rate rose because the labor force dropped a bit. There are roughly the same number of people who were unemployed: 12.72 million vs 12.27 million in June. However, some people dropped out of the labor force, causing the unemployment rate to increase.

People drop out of the labor force for many reasons. Some are ill, while others have to care for sick relatives. In this recession, many people have decided to go back to school. However, another unfortunate reason is that people have become so discouraged by job prospects that they've given up looking for work. The BLS calls them discouraged workers, and in fact that number rose -- from 821,000 in June to 852,000 in July.

One other bit of good news is that there are 185,000 fewer long-term unemployed than last month. These are people who  have been without a job for 27 weeks, but are still actively looking. Another encouraging sign is that more people are unemployed because they've returned to the work force, while fewer are unemployed because they lost a job.  (Source: BLS, Employment Situation Summary )

What This Means for You

The employment picture is slowly improving. The areas that are improving fall into two general areas: low-skilled and low-paid, like restaurant and retail, and high-skilled and high-paid, like health care and auto manufacturing. If you can figure out a way to acquire the skills, you don't have to settle for a low-paid job. That's why so many people are taking advantage of the Federal government education loans to go back to school.

The fact that the jobs situation is improving means that the economy is fundamentally sound. The biggest problem is that businesses are waiting for the Federal government to take action one way or another to support economic growth. The large number of temporary jobs means that businesses need workers, but are afraid to add to their payroll. The fact that the temporary jobs number is declining a bit  while permanent jobs are increasing indicates that some businesses are switching from expensive temporary services to permanent positions.

Congress is waiting until the after the election to tackle job growth strategies, tax cuts and government spending. Meanwhile, the economy could be doing a lot better. Share your opinion in What Causes Unemployment?

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August 7, 2012 at 7:17 pm
(1) Jim Wygand says:

I especially like your opening comment about the “permanent scars” that unemployment leaves on a society. I think we have to acknowledge that employer-employee loyalty has changed over the past decade or two. I don’t condemn companies for offshoring but when it happens entire communities are often destroyed because of the way our society organized around large companies that were often the main or even the only employers in a given location. The last set of permanent scars were inflicted in the Great Depression when my parents’ generation suffered immensely. The only way to deal with the current circumstances in my view is to have special programs set up to re-train and even help re-locate those displaced by job loss. Whether that is done via tax credits to the companies or through government programs makes little difference to me, but as a society we need to acknowledge 1) that jobs are part and parcel of self-esteem in America, 2) that the structure of our society has changed and jobs are no longer sinecures; 3) that maintaining full employment is a legitimate role for a government; 4) that our national welfare and security depend on a working population. 5) that honest, hard-working people are the backbone of any free society. America is in the process of re-inventing itself (as it has done often in the past) and we can ill afford to be mean-spirited or callous to the question of unemployment.

August 8, 2012 at 1:42 pm
(2) useconomy says:

Hi Jim,

That’s a very insightful comment. One of the things about the Great Depression is that people banded together, even if they didn’t have much. People say that the New Deal didn’t end the Depression, but in fact government spending did — via World War II.

Today, we take for granted many of the social programs that were created by the New Deal, such as Social Security and the FDIC. We don’t have to see elderly people starving on the streets. We don’t see soup lines. We don’t have to worry that banks will close on Friday, and only give us ten cents on the dollar on Monday.

I completely agree that we need to retrain the long-term unemployed. An even greater threat than offshoring is the jobs being replaced by technology. Older workers could be productive for another 20 years, given the right skills. Even college graduates are worried that they won’t find jobs that match their abilities. There is a great deal of human productivity that is not being used.

I agree — it makes no difference whether businesses get tax credits or the government runs the programs itself. Rather than bickering over who gets the tax cuts, let’s tackle the real problems and get on with it!


August 10, 2012 at 5:17 am
(3) Roger says:

The Indian prime minister gave a statement as “Nonsense act of violence” commenting on Gurdwara shooting at Wisconsin

And thé same statement CAN be complétéd by telling like this

“Nonsense act of violence by Nonsense people living in America”

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