US jobs: The employment problem in the United States is looking more structural. The decline in non-farm payroll employment may have been largely attributable to laid-off census workers. But the private sector only added 71,000 jobs, nearly 50 percent fewer than economists had forecast. This suggests companies are struggling to absorb new workforce participants and that the task of restoring job creation will be far tougher than expected.
The July unemployment report made for mostly gloomy reading. While census job losses exceeded the headline fall in employment, state and local governments also laid off an additional 48,000. And private-sector job creation was far below the increase in the working-age population. Around 90,000 jobs have been created monthly during 2010, significantly underperforming the monthly average of 222,000 in the first full year of the six previous recoveries. Manufacturing and healthcare sectors continued modest job creation, and the average hours worked ticked up. But the labor market recovery is not accelerating. In fact, recent indicators actually have pointed to further slowing.
The depth of this recession was already a post-war record. The adverse effects of its duration are starting to be felt. While unemployment is up only fractionally in the past year amid the economic expansion, long-term unemployment is up by 1.6 million to 6.5 million and now accounts for 45 percent of the official total. Moreover the "discouraged" portion of the workforce stands at 1.2 million, up 40 percent over the past year, with no signs of diminishing.
The recent extension of unemployment benefits to 99 weeks - from a previous record of 65 weeks in the 1970s - may distort the picture. Yet the reality is that extended joblessness and worker discouragement will not so easily be remedied. Lost skills and discipline could impede workers from getting jobs even at the lower wages being forced by emerging markets competition. More extensive subsidies for retraining are among the few government expenditures able to prevent such workers from becoming a more permanent burden. Of course, it may be that job creation is simply taking longer than usual to find its post-bottom legs. But after this latest data, it may be time to start thinking about departing from the typical jobless policy playbook to give the labor market a needed push.