Weak Performance, More Pain Likely
With this morning’s release of the labor market report for June, the analytical spotlight shifts somewhat from structural labor market challenges, partially manifested in widely different employment prospects among age and educational attainment cohorts, to cyclical weakness. These most recent jobs data, more than anything, reflect the impact of a significant slowdown in the pace of U.S. economic growth from what was already an anemic clip during the first quarter. Average net payroll employment gains fell sharply from 226,000 during the first three months of the year to 75,000 during the second quarter in tandem with other data showing that the pace of U.S. GDP growth may be approaching a stall.
The net payroll employment addition during June was a meager 80,000, about half of what is needed to even absorb new entrants into the labor force and certainly well short of the 250,000 to 300,000 net monthly job gains that the U.S. needs to make any real progress in digging out of what is still a deep hole. The big picture is not a good one. Three years after the technical bottom of the recession the unemployment rate remains above 8 percent. And there was little change in June in any of the indicators that reflect the serious long-term unemployment problem that confronts the U.S., an issue that will likely be prevalent for years. Arguably, policy action will be needed to minimize the many public costs of protracted jobless spells in nearly 42 percent of the unemployed population.
A range of uncertainties are contributing to sluggish economic growth and a miserable labor picture for the U.S. Significant fiscal policy issues on the federal level need to be resolved. The states are still working through difficult budget challenges contributing to a persistent, albeit moderating decline in government payrolls. Major regions of the global economy, most notably China and the Eurozone, are either in recession or slowing markedly. Until these outlook issues are stabilized and clarified, more pain is likely ahead for the U.S. economy and the U.S. job market.