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by Don Azarias
July 2, 2010 Some recently-released gov ernment and private eco nomic reports raised hopes for an improving job market with fewer layoffs and more hiring. But is it really true? Please read on. A wave of census hiring lifted payrolls by 431,000 in May, but job creation by private companies grew at the slowest pace since the start of the year. And, according to the report, the majority of those jobs are temporary census work. Out of the total 431,000 positions added in May, 411,000 of the positions are temporary government jobs created for Census 2010 workers. By contrast, hiring by private employers, the backbone of the economy, slowed sharply. They added just 41,000 jobs, down from 218,000 in April and the fewest since January. The overall number also fell short of expectations. Economists had forecast employers would add 513,000 jobs.
Economists and analysts say layoffs will continue to taper off and that companies will gradually increase hiring. The unemployment rate dipped to 9.7 percent as people gave up searching for work. The number of people filing first-time unemployment claims dipped for a second straight week, though it remains elevated for the year. Also, an index that tracks activity in the U.S. service sector showed job growth in May – the first time in more than two years. “While we will see a period of job growth, it is going to take a long time to get back the jobs we lost,” said Mark Zandi, chief economist at Moody’s Analytics. He also predicts that it will take until 2013 for the economy to create enough jobs to recoup the 8 million jobs lost during the downturn.
Jennifer Lee, an economist at BMO Capital Markets had this to say: “The jobs data so far this morning haven’t screamed strength, but they continue to set an encouraging tone.” While most economists and analysts agree that the economy will grow at a slower phase, the reports showed modest increases in factory orders and retail sales as well.
Orders to U.S. factories climbed in April, pulled up by a surge in demand for commercial aircraft, the Commerce Department said. But the overall increase was smaller than the uptick in March orders. And excluding transportation, orders actually fell in April by 0.5 percent the poorest showing in 13 months. Analysts are hoping that hiring will show stronger gains in coming months. That will provide a boost to household incomes and keep consumer spending growing at a healthy pace. Consumer spending is critical for a sustained economic recovery because it accounts for 70 percent of total economic activity.
A separate Labor report showed layoffs fell for a second straight week. They dipped by 10,000 to 453,000 last week. Still, the declines come after a sharp increase three weeks ago and claims remain at elevated levels. Unemployment claims are closely watched by economists because they are considered a gauge of layoffs and a measure of companies’ willingness to hire new workers. After falling steadily in the second half of 2009, claims have leveled off and are now only slightly below their level at the start of this year. That has raised concerns among some economists that hiring is still sluggish.
All told, 15 million people were unemployed in May. Counting people who have given up looking for work and part-timers who would rather be working full time, the “underemployment” rate fell to 16.6 percent in May from 17.1 percent in April. That reflected fewer people forced into part-time work. Still, the high underemployment figure shows how difficult it is for jobseekers to find work. The number of people out of work six months or longer reached 6.76 million in May, a new high. They made up 46 percent of all unemployed people, also a record high.
The prospect of persistently high unemployment is likely to prevent consumers from going on the kinds of shopping sprees they typically do during early phases of recoveries. That’s a key reason why this recovery isn’t as energetic as those usually seen in the past. However, workers did see wages rise modestly last month. Investors are also worrying about the impact that Europe’s economic problems could have on the U.S. During the past month, investors have been preoccupied with rising debts in Europe, fearing they could hobble the regional economy and eventually the U.S.
Summing it all up, hiring isn’t expected to be consistently strong enough to quickly drive down the unemployment rate this year. Economists think the rate will remain above 9 percent by the November midterm elections. That could make Democratic and Republican incumbents in Congress vulnerable.
For the readers’ information only 20 percent of Americans consider the economy in good condition, according to an Associated Press-GfK Poll conducted in mid-May. That would be a worrisome factor for Obama and the Democratic Party in this fall’s midterm elections. It’s incumbent upon them to turn things around or they will no longer be the incumbents after the November elections.