The US economic recovery is being held down by the unemployment rate. It’s such a problem that although the unemployment rate fell from 9.7 percent in May to 9.5 percent in June, more jobs were cut than were created. Jobless Americans out of the labor force are skewing all of the stats in the jobs report. The stock market, accepting the numbers at face value, rose slightly Friday morning. Soon after a large decline in factory orders was reported at 10 a.m., the Dow Jones Industrial Average lost 32.5 points. A lot of conflicting data has been in the US economy. Even as job creation, factory orders and consumer confidence fell, some manufacturing companies that want to hire can discover workers with the kind of skills they need.
Anything with unemployment rate and consumer confidence
The whole economy is affected by the unemployment rate. An uncertain employment picture wreaks havoc on consumer confidence, which declined in June. The decline in consumer confidence led to a decline in auto sales, and pushed pending home sales off a cliff as tax credits for home buyers expired. Consumer spending makes up 70 percent of the U.S. economy, and disposable income is a distant memory for millions of jobless workers.
The unemployment rate and why it dropped:
The unemployment rate reached its lowest since July 2009. But according to the Wall Street Journal, the decline wasn’t due to improvement within the labor market. With a 125,000 job loss, the unemployment rate really should have increased. But 652,000 individuals gave up looking for a job – which happens to be the sharpest one-month decline in 15 years in the Labor Department’s survey. Some could be choosing other opportunities like school. Some are at the end of their unemployment benefits. 1 million individuals stopped looking for work within the last 2 months.
Jobs are mismatched for many of the unemployed
The unemployment rate remains stubbornly high because individuals are nevertheless applying for the jobs. The New York Times reports that the problem is a mismatch between the kind of skilled workers needed and also the ranks of the unemployed. During the recession, domestic manufacturers accelerated the long-term move toward more automation, laying off their lowest-skilled workers and replacing them with cheaper labor abroad. Now these companies need to hire people who can operate sophisticated computerized machinery, follow complex blueprints and demonstrate higher math skills than old-school assembly line workers.
Is there a silver lining in the jobs report?
You are going to have to try really hard to be positive about the recent jobs report. The Washington Post reports that Friday’s jobs report could mean that the economic recovery that started last year has lost momentum, but the numbers aren’t so bad as to suggest the nation is heading into a double-dip recession. The numbers show the US economy falling. The job growth number is a decline from stronger levels in March and April, but the June job creation number of a mere 83,000 is better than any month out of the past 31, other than the last two.
More information about this topic at these websites:
New York Times
nytimes.com/2010/07/02/business/economy/02manufacturing.html?_r=1&ref=us
Wall Street Journal
blogs.wsj.com/economics/2010/07/02/why-did-the-unemployment-rate-drop-2/
Washington Post
washingtonpost.com/wp-dyn/content/article/2010/07/02/AR2010070202004.html?hpid=topnews
