Weak jobs gains spark worry of a slow recovery By JOHN CHALLENGER Last Updated: 5:34 AM, July 4, 2010
Posted: 1:34 AM, July 4, 2010
Comments: 1 | More Print No one has officially announced it yet, but a growing number of signs point toward a recovery. Employers have significantly curtailed layoffs. The service and manufacturing sectors are seeing gains. And, corporate profitability and productivity have been strong.
However, despite many positive indicators, there is an overwhelming sense that this recovery is extremely fragile, and worries persist about a double-dip recession.
One bright spot came in the household survey, which found that unemployment fell from 9.7 percent to 9.5 percent, the lowest since July 2009. Another is that job-seekers out of work for longer than 27 weeks dropped slightly from a record high of 6,763,000 to 6,751,000.
However, 225,000 of the temporary Census workers left their positions last month. The private sector, which added 158,000 jobs in March and 241,000 in April, saw payrolls grow by 83,000 jobs in June, significantly more than the 33,000 jobs created in May, but too few to indicate a sure recovery.
Moreover, the "underemployment" rate, which measures the unemployed plus the people who have stopped looking for work or who cannot find full-time jobs, dropped only one tick from 16.6 percent to 16.5 percent, in part because the number of discouraged workers increased, a sign that many workers gave up looking for jobs in June. Now, almost half of the pool of the unemployed have been out of work for 27 weeks or more.
These are, perhaps, the most troubling figures in the labor report. Long-term unemployment has long-term consequences, not only for the individual affected, but also for the economy as a whole. The long-term unemployed are more likely to lose their homes to foreclosure. They are forced to dramatically curb spending. They are at high risk of bankruptcy.
So, the question becomes: Is this latest report simply a small bump on the road to recovery or indicative of greater flaws in the economy that could signal a double-dip recession?
To be certain, this recovery, like others before it, will have its surges and pauses. In the wake of the 2001 recession, the economy suffered 19 to 20 months of jobless recovery. The previous recession had a 15-month jobless recovery period.
While some may discount a portion of the nearly 900,000 jobs created this year for being temporary or part time, it's much better than the over 700,000 jobs we lost in just one month at the beginning of 2009. These jobs are putting money in people's wallets that will eventually make its way back into the economy through increased spending.
Those expecting a quick turnaround, however, are expecting far too much. Employers are cautious when adding workers in the early stages of recovery.
However, they are, in fact, moving forward. The number of people forced to work part time for economic reasons fell by 525,000 over the past two months.
This represents the first step toward a viable and sustainable job-market recovery. Even when hiring accelerates, the process is laborious. A company can shed 5,000 workers in an afternoon, but hiring 5,000 workers can take months.
It is critical to keep this in mind as we gauge the strength of the recovery based on these monthly reports. While this month's report may be mixed, it is typical of the period after a recession, and, even with some worrisome aspects, it still shows that we are heading in the right direction.
John Challenger is CEO of global outplacement firm Challenger, Gray & Christ mas Inc.
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