[Thanks to Jake at EconomPic Data]
Friday, July 17, 2009
Monday, July 6, 2009
May flowers bring June showers, according to the latest unemployment data from the Bureau of Labor Statistics. Because "only" 322,000 jobs were lost in May, incurable optimists were persuaded that the worst of the recession was behind us. After all, the hit was at least twice as big for each of the months in the December- March period. But Thursday's press release was grim. 467,000 jobs were lost in June, as the unemployment rate rose to 9.5%. There are fewer people working in the U.S. today than when former President George W. Bush first took office, even though the workforce has grown by 12.5 million since then.
Almost as bad, the average work-week declined another tenth of an hour to 33.0. Big deal, you might say, what's a measly six minutes? Well, six minutes spread across the entire workforce is the wage-equivalent of tens of thousands of jobs. Take it from Uncle Sam, who sees the difference in payroll withholdings that come into the Treasury.
The attenuated work-week bodes ill for a quick job recovery, as there is significant slack capacity building up among the workforce still employed. When business begins to improve, employers will add back hours to the workers on hand before they re-hire laid-off workers. Another damper on job creation will be a ten percent increase in the federal minimum wage scheduled for later this month, from $6.55 to $7.25 an hour. Congress thought it was doing workers a favor when it legislated the increase two years ago, but the intervention instead will have employers calculating twice before expanding payrolls. Bet Congress would like to have that one back.
While unemployment data are traditionally viewed as lagging indicators, this time may be different. Credit is being crunched faster than the Fed can print it, depressing consumption. This de-leveraging will make employers extra cautious about hiring. They'll need to see not just green shoots, but a veritable rain forest before they make the leap. Meanwhile, the shrinking purchasing power of the American consumer perpetuates a vicious cycle, as illustrated below.