A Weak Job Market, But Not a Collapsing One

After months of gloomy news on the employment front, the latest BLS jobs report offers evidence that the job market, while far from robust, is not collapsing either. The most encouraging numbers in today’s employment report showed that private payrolls grew 154,000 in July. Upward revisions in payroll estimates show that private employment was 26,000 higher in May than reported earlier while the private job total was 49,000 higher in June. Since March, private payrolls have increased an average of 144,000 a month. This rate of employment gain should be fast enough to whittle down the number of unemployed, although at a very slow rate.

Counterbalancing the employment gains of private employers is the continued loss of jobs in the public sector. Total government employment fell another 37,000 in July, roughly the same rate of decline we have seen since March. Government employment reached a peak of almost 23 million in May 2010. In the 14 months since then public payrolls have declined 946,000, offsetting nearly half the private-sector job gains occurring over the period. To be sure, May 2010 government payrolls got a sizeable boost from temporary Census workers. Nonetheless, state and local government payrolls have been shrinking in most months since the start of 2009.

The pace of job loss has been gaining momentum over time. In 2009 state and local government payrolls fell an average of 11,000 a month, and in 2010 they shrank 21,000 a month. So far in 2011 they have fallen about 28,000 a month. Many states and localities remain in weak financial shape, so it is hard to see when a turnaround in state and local employment will begin.

The federal government’s resolution of the debt ceiling debate earlier this week offers the prospect of shrinking federal payrolls over the next few years. For some time to come, job losses in the public sector will offset some or all of the payroll gains we see in the private sector.

The news from the Labor Department’s household survey was considerably less encouraging than that from the employer survey. Household respondents reported a job loss of 38,000 in July, the third month out of the last four in which employment declines have been recorded in the household survey. Since March, job losses in the household survey have averaged 142,000 a month. The unemployment rate edged down in July compared with June because the number of Americans looking for work declined.
Many jobless adults are evidently (and justifiably) discouraged about their chances of finding a job in this market. The labor force participation rate reached a new post-recession low in July. The percent of adult Americans who hold jobs also reached a new low in July (58.1%). This was the lowest U.S. employment-population ratio in 28 years.

Financial markets will cheer the private sector payroll gains in the latest jobs report, but the overall picture of the job market offers little reason for optimism. The fraction of adults who hold jobs has now fallen below the worst month in the recent recession, and workers’ real earnings are flat. It’s hard to be encouraged about prospects for the unemployed or about employees’ spending plans in a job market that still seems mired in the doldrums.