Jobs Report: OK, Now You Can Panic

Last Updated Jul 8, 2011 5:49 PM EDT

The jobs "blip" is officially a bleep. After unemployment rose in May, government officials blamed temporary factors, like nasty weather, soaring gas prices and Sarah Palin's political career. Nice try. Today's labor report has the jobless rate ticking up to 9.2 percent. The numbers are alarmingly bad:
  • The economy created an anemic 18,000 jobs, when at least 125,000 per month are needed just to match the number of new people entering the labor market
  • The private sector created only 57,000 jobs
  • The federal government lost 14,000 jobs, while local governments shed 18,000 positions
  • Over the last two months, the economy has produced an average of only 87,000 jobs, lower than the Labor Department had previously forecast
  • The share of the working-age population that has a job fell to 58.2 percent, matching the low reached in December 2009 and November 2010
  • The average period of unemployment hit a record high of 39.9 weeks
  • Average hourly earnings for all private nonfarm employees declined 1 percent, with wages up a meager 1.9 percent over the last 12 months
  • More than 250,000 Americans gave up looking for work
Perhaps the scariest part: Not a single industry showed strong employment growth. Not health care, where formerly robust job-creation appears to be slowing. Not retail. Not manufacturing or construction. Not restaurants. Not even financial services, where healthy corporate profits might've been expected to drive hiring; the sector ditched 15,000 jobs, erasing a small gain in May. Says economist Dean Baker:
On the whole, this is one of the most negative employment reports since the recovery began. It indicates that the economy has made no progress whatsoever in re-employing the people who lost their jobs in the downturn. Even more discouraging is the fact that there is no reason to expect anything to change for the better any time soon. The pace of job loss in the public sector is likely to accelerate, with no evidence of an offsetting pickup in the private sector.
Fiddling over the deficit
I know what you're thinking. Forget jobs -- what about deficit-reduction?! If only we could shrink government down to the size of a gluon and balance our books, like any apple pie-lovin' American should, everything would be just fine. Unless that's Washington I'm thinking about. You know, the folks currently playing poker with the debt ceiling (I'll see that $2 trillion spending cut and raise you $4 trillion) and plotting to save the economy by lowering Social Security payments. Who's up for a hiring binge?

By now, the most troubling aspect of the jobs crisis is our political leadership's inexplicable refusal to confront it (click on above chart to expand). As the economy noses downward, policymakers are actually throttling back, as if the main reason for the slump were poor people getting their teeth cleaned on the government's dime.

What passes for debate on Capitol Hill has degraded into an exchange of worn talking points. House Speaker John Boehner, R-Ohio, barely had time to look over the wreckage this morning before blaming the downturn on "misguided 'stimulus' spending" and excessive regulation. Hey, congressman, don't forget illegal immigrants and gay marriage.

Deep in the hole
Elsewhere in bizarro world, President Obama said businesses aren't adding employees because of uncertainty over whether Congress will raise the debt limit. As if certainty that lawmakers are not, in fact, certifiably nuts were somehow sufficient to stimulate demand. And Austan Goolsbee, chairman of the Council of Economic Advisers, responded to the disastrous labor report with an analysis that runs all of four paragraphs. His solution:
... a balanced approach to deficit reduction that instills confidence and allows us to live within our means without shortchanging future growth.
Even for political boilerplate, this is drivel. Here's an iron law of economics -- living within your means is tough without a job. And "balanced," in this case, evidently means cutting three or four dollars in government spending for every dollar generated in new revenue, as the White House seems to favor.

Here's where we are. When the recession started in late 2007, the economy had 7 million more jobs than it does now, according to the Economic Policy Institute. We need more than 11 million jobs just to reduce the unemployment rate to 5 percent, where it stood shortly before the financial crisis. Reaching that figure by December 2014 would require adding at least 350,000 jobs per month for the next three-and-a-half years.

For now, that target seems as delusional as our politics.

Thumbnail from Flickr user Alessandra Cimatti
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    Alain Sherter is an award-winning business journalist who has written for The Deal, MarketWatch and Thomson Financial Media.

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