Today’s employment report is dismal. It may not be fatal, but it’s the most discouraging update for jobs from the Labor Department since the Great Recession was formally declared dead and buried as of June 2009.
Let’s start the grim work of digging through the numbers by focusing first on total nonfarm payrolls, which includes government employment. The net change is exactly zero for August, which means that last month was the worst for jobs creation since the 29,000 loss for September 2010. No wonder that the unemployment rate stayed at an elevate 9.1%.
The main trouble in this widely cited number is that the government continues to shed jobs. The loss was relatively mild in August, with government jobs retreating by only 17,000–down from a 71,000 loss in July. But the decline has been virtually non-stop for more than a year, and last month was no exception.
The trend looks better with private-sector job creation, but not by much. A mere 17,000 new positions were created in corporate America in August, a nearly complete fade from July’s 156,000 gain. We haven’t seen numbers this low since February 2010’s decline of 21,000 private-sector jobs. The one bright spot: the healthcare and social assistance category, which popped by 36,000, up a bit from July’s 33,000 rise. But there’s no way to soft pedal the hard fact that the service sector—the main employment engine in the economy—suffered a huge downshift, adding just 20,000 new jobs on a net basis vs. 104,000 in July. Add that slowdown to the slight loss for jobs in the goods-producing sector (which posted a strong 52,000 increase previously) and it’s easy to see why the jobs machine has all but rolled to a stop.
The pessimistic view is that we’ve come full circle in the “recovery.” The revival of the labor market that began in the spring of 2010 has dried up. It was a weak rebound, but now even that modest healing process is over. If you subscribe to this view, the future looks dark. Whatever burdens weigh on the economy (and there are plenty), the load becomes quite a bit heavier without job growth. And let’s not even consider what might happen if the labor market begins contracting. That’s already happening in the government sector, but at least the corporate world has been a net contributor to employment, if only slightly as of August.
Is that thin reed about to end? No one really knows, of course, although you can’t blame anyone from worrying. “This is further evidence that the economy is very close to stalling if not having stalled,” warns Nariman Behravesh, chief economist at IHS. “Businesses continue to be super, super cautious.”
But before we give up hope, let’s recall that August was a tough month on a number of fronts. From the politically inane budget debate to S&P’s downgrade of Treasuries to wars and economic turmoil elsewhere in the world, there’s been no shortage of excuses to delay hiring. There was also the temporary loss of 45,000 jobs due to the Verizon strike weighing on the statistics. Meanwhile, the fact that the trend in jobless claims isn’t anywhere near as dark as today’s jobs report offers some support for thinking September’s numbers will be better. Of course, if jobless claims start to rise again in the weeks ahead, that would be quite a different ball game.
For now, the question is whether August was bedeviled with a tsunami of one-time events, or does it marks a new wave of trouble? We’ll know the answer soon. Meantime, there’s not much to celebrate as the Labor Day weekend arrives.