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Are We Turning the Corner - Again?
by Paul Grasso, July 31, 2010
Earlier this month, the Bureau of Labor Statistics (BLS) reported in its Employment Situation Summary that the national unemployment rate dropped by 200 basis points to 9.5% in June. The national unemployment rate is now at its lowest level since July 2009 and has declined 0.7% from its highest level of the current recession in October 2009.
In spite of the drop in the unemployment rate, some economists called the report "disappointing," while other economists called it a "surprising announcement." The economists who predicted a rise in the rate predicted it as the result of the 225,000 people ending their temporary Census 2010 assignments.
In general, the Summary revealed that "total nonfarm payroll employment" declined by 125,000 in June and that "private-sector payroll employment increased by 83,000".
So, the question remains, are we on the road to economic recovery - or not?
A cursory review of the report reveals that:
- The number of people unemployed for 27 weeks or longer (long-term unemployed) remained at 6.8 million and has increased by 600,000 since February.
- The labor force participation rate fell by 0.3% to 64.7%. (The labor force participation rate is the share of the population between 16 and 64 working or seeking work.)
- Private employers added 83,000 jobs, 42,000 fewer than the 112,000 analysts had forecasted. It has been estimated that 7.5 million jobs have been lost since the start of the recession. If the economy produces 125,000 jobs a month, it would take 5 years to return to pre-recession levels. So, the addition of 83,000 jobs, while better than a job loss, is a third lower than the number needed.
- Initial claims for unemployment benefits rose the week prior to the report.
These data beg the question: How could the unemployment rate drop when other indicators clearly worsened?
The short answer is that fewer people are actually looking for jobs. It must be remembered that, to be considered unemployed, you actually have to be looking for work. The job market is now so tight that many people, especially teenagers and young adults and the longer term unemployed, have given up looking for work. Because these people are not actually looking for work, they are not considered unemployed, which causesa drop in the unemployment rate. This is further supported by the BLS's Employment Situation Summary thatshows the civilian labor force (all civilians 16 years of age and over classified as employed or unemployed) decreased by 652,000 people in June.
The lower-than-expected increase in private sector jobs and a long-term unemployed rate which held steady, coupled with a lower labor force participation rate, are all indications that the national economy has not made significant gains.
Closer to home, according to the New York State Department of Labor (NYSDOL), New York State's seasonally adjusted unemployment rate dropped from 8.3% in May to 8.2% in June. This is the state's lowest unemployment rate since April 2009, when it was 8.1%. New York State is performing better than the rest of the nation, while Clinton County's unemployment rate, at 9.6%, is just one tick higher than the national level of 9.5%. Overall, the North Country, with an unemployment rate of 7.9%, is showing some robust recovery, due partly to the growing Global Foundries operation in Saratoga County to the south. This project is the single largest private economic development in the US, which is currently being developed.
The number of unemployed New Yorkers also dropped, falling from 806,200 in May to 798,600 in June 2010, its lowest level since April 2009. New York State's economy lost a seasonally adjusted 8,500 private sector jobs (-0.1%) in June.
"While we lost a small number of private sector jobs in June 2010, New York's unemployment rate continued to show improvement. Both the state's unemployment rate and the number of unemployed residents reached their lowest levels since April 2009," said Peter A. Neenan, Ph.D., Director of the Division of Research and Statistics.
Again, the data seems counter-intuitive indicating a decrease in the number of private sector jobs at the same time as a decrease in the number of unemployed New Yorkers and a decrease in the unemployment rate.
The unemployment figures for the region:
| June 2010 | May 2010 | June 2009 | |
| North Country | 7.9% | 8.4% | 7.9% |
| New York State | 8.2% | 8.3% | 8.6% |
| United States | 9.5% | 9.7% | 9.5% |
| Clinton | 9.7% | 9.4% | 9.6% |
| Essex | 7.8% | 8.5% | 8.3% |
| Franklin | 7.9% | 8.3% | 8.2% |
| Hamilton | 6.1% | 7.5% | 5.5% |
| U-6 | 16.5% | 16.6% | 16.5% |
Change in Jobs by Sector, June 2009 - June 2010
| Sectors With Job Gains: | |
| Educational & Health Services | +23,900 |
| Leisure & Hospitality | +23,000 |
| Other Services | +7,200 |
| Government | +4,700 |
| Sectors With Job Losses: | |
| Trade, Transportation & Utilities | -15,500 |
| Construction | -14,500 |
| Manufacturing | -13,900 |
| Financial Activities | -12,700 |
| Information | -4,800 |
| Professional & Business Services | -1,700 |