U.S. Job Market Remains in the Doldrums

The latest BLS jobs report shows continued meager gains in private sector employment. For the eleventh successive month private employers added to their payrolls, but the job gains have been too small to put a dent in unemployment. On average this year, private employers have added 107,000 jobs a month. This pace is approximately fast enough to hold the unemployment rate constant, but it is too slow to reduce unemployment noticeably. The most recent employment report does not offer much cheer for the holiday season. In November, private sector job growth was less than half the monthly average during the previous 10 months.

The net gain in private jobs in November was mainly due to an increase in employment in the temporary help services industry. Employment in the government sector shrank modestly in November, with all the job loss concentrated in local governments. Since the start of the year, government employment has shrunk by about 20,000 jobs a month, and all the losses have occurred in local government payrolls. The pace of government job loss has slowed in recent months. Revised payroll data show that public payrolls are roughly unchanged since September. I remain pessimistic about the outlook for state and local government employment. With the end of federal fiscal relief to the states, states and localities will have to finance an increasing share of outlays out of their own resources. Even though state tax collections have improved in recent months, many states and localities face a harsh budget outlook. It is hard to believe a large number of them will be adding to their payrolls.

The situation of workers who’ve managed to hold on to their jobs is slowly improving. The work week remained unchanged in November, but it has increased 1.5% (0.5 hours) since the beginning of the year. Measured in inflation-adjusted dollars, average weekly earnings increased 2.3% between December 2009 and October 2010. Real hourly earnings increased 0.9%. The real income gains of working Americans have helped fuel the slow recovery in household consumption.

The unemployed have not fared nearly as well. The nation’s unemployment rate edged up 0.2% in November and is now only 0.3 percentage points below the cyclical peak, which was attained in October 2009. Since the start of the year, the average duration of an unemployment spell currently in progress has increased 16%, rising from 29.1 weeks in December 2009 to 33.8 weeks in November.

The future may hold even worse news for jobless Americans. Congress has failed to agree on a package to finance extended unemployment benefits for workers who have been unemployed longer than 26 weeks. In mid-November, nearly 4 million workers were collecting Emergency Unemployment Compensation (EUC) and another 966,000 were collecting Extended Benefits (EB). All EUC recipients and many workers collecting EB will lose their benefits unless federal financing for the programs is restored in the next few weeks.

In the absence of congressional action, it will be bleak holiday season for the long-term unemployed.