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National Employment Numbers Disappoint Again.

July 6, 2012

For the 4th straight month, the national employment figures have been lackluster. In June, only 80,000 new non-farm jobs were created nationwide. The economy needs about 125,000 new jobs a month to keep up with population growth. The overall unemployment rate remains at 8.2 percent.

There are a couple of interesting hidden stories within these overall numbers. The first deals with employment by industry. Within the 80,000 new jobs, manufacturing added 11,000, business services added 47,000 and construction added 2,000. This marks the first increase in construction employment since January. The biggest employment losers were retail (-5,400 jobs) and government (-4,000 jobs). Combined, these two industries make up a little more than a quarter of the overall employment mix. The government sector was one of the few sectors growing during the initial stages of the recovery, but now that stimulus spending has run out and government deficit concerns have risen, this sector is not likely to contribute much employment in the near future.

The second story is more systemic. While employment dominates talk on the economy, we sometime forget the overall economy is doing okay. Economic output (GDP) continues to grow (if not at a blazing pace). GDP is well above pre-recession peaks, so the economy is producing more than it ever has. It is just doing so with 5 million fewer workers than we had before the recession. This really speaks to technology. During the recession, businesses sought to increase output with fewer workers. Investments in technology made this possible and now, this improved efficiency has translated into a jobless recovery.

History tells us though, at some point, technology can only carry us so far. Eventually businesses need to expand their workforce in order to continue to grow, and that is what we are seeing currently, though the gains are slower than we would like. Just how long it will take for employment to exceed its pre-recession levels remains unknown, but the most recent national forecasts suggest it may not be until late 2014 or 2015.

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