A Job Market that Continues to Move Sideways

Analysts who worried the U.S. is sliding into recession may breathe a sigh of relief over today’s employment report, but the nation’s long-term unemployed have little reason to celebrate. The BLS employer survey shows modest gains in private employment in September compared with August. Private employers added 137,000 jobs in September, though about 45,000 of the gain was due to the end of a telecommunications strike. The BLS also reported a modest upward revision in the estimated employment gain in August. On average over the past four months private employers have added about 107,000 workers to their payrolls each month. This is close to the number needed to keep the unemployment rate from rising, though it is too small to put a dent in the nation’s unemployment rate.

Unfortunately, the number of workers on government payrolls has been shrinking. Public payrolls fell 34,000 in September, erasing one-quarter of the employment gain registered in the private sector. On a seasonally adjusted basis, government payrolls declined 30,000 a month over the past four months. They have shrunk a total of 500,000, or 2.2%, since private employment began growing at the beginning of 2010. The outlook for state and local employment is far from rosy. Many states and localities have seen tax revenues fall sharply since the end of the last economic expansion in 2007, and there is little prospect the federal government will shore up state and local budgets with an additional dose of fiscal relief.

The household survey offers a brighter picture of employment gains in August and September. According to that survey employment rose about 330,000 in August and almost 400,000 in September. The percentage of the adult population holding a job has edged up 0.2 percentage points from the historical low attained in July. Since the end of the last economic expansion the U.S. employment-population rate has fallen 1.8 percentage points. In fact, it has fallen 0.5 percentage points since private sector employment began to rebound at the start of 2010. Employment gains reflected in both the household survey and the employer survey show that the pace of economic growth since the recovery began has been too weak to keep up with the growth of the working-age population. The latest BLS employment report does not fundamentally alter that picture.

Employment is slowly rising, but not fast enough to bring much relief to the unemployed, especially the long-term unemployed. The average duration of unemployment reached a peak of 40.5 weeks in September, about 10% higher than the average duration at the start of this year. The median duration of unemployment has also risen since the beginning of the year, though much more slowly the average duration, indicating that much of the increase in unemployment durations has been suffered by unemployed workers who have been out of work the longest. There is considerable evidence that workers in long unemployment spells are viewed much less favorably by employers than workers just entering the ranks of the unemployed. It requires very strong economic growth and robust gains in the job market for employers to take a second look at applications from workers who have been jobless a year or more. The current pace of economic growth is far too weak for employers to give the long-term unemployed a second look.

The most recent jobs report contains a couple of pieces of encouraging news. After a long period of decline or stagnation, employment in the construction industry improved in September, rising 26,000 compared to the seasonally adjusted level in August. The stubborn persistence of a deep recession in construction has been a major source of weakness in the recovery. The job gains in September may signal a coming improvement in that industry. Payrolls in the temporary help services industry also increased in September. Over the past three months temporary help services employment has increased an average of about 18,000 a month. Because employment changes in this industry frequently provide an indicator of employers’ hiring intentions in future months, the improvement in temporary help employment suggests that at least a few employers remain optimistic about their prospects. It will require much more powerful signals than these, however, to demonstrate that the job market is on its way to a full recovery.