Another Bruising Month for the U.S. Job Market
July's modest 71,000 gain in private payrolls was less than the 100,000 economists had forecast. The number of temporary U.S. Census workers fell by 143,000, and government jobs overall declined by 202,000.
Equally significant, June's total was revised to a loss of 221,000 jobs, worse than the previously estimated 125,000 cuts, including a gain of just 31,000 private sector jobs, down from the initial estimate of 83,000.
A Bloomberg survey had expected the economy to lose 70,000 jobs in July, but to add 100,000 private sector jobs. July's job loss total was the second straight monthly drop in jobs this year.
The Official Jobless Rate Remains 9.5%
July's poor private sector job gain may prompt the U.S. Federal Reserve to implement additional measures to stimulate a U.S. economy that's operating well below potential and that hasn't created nearly enough full-time jobs for the estimated 22 million to 23 million Americans seeking full-time work.
The unemployment rate in July remained at 9.5%. But that modest good news stems in part from fewer people looking for work, meaning they're not officially counted as unemployed even though they're without work. That rate, called the workforce participation rate, dipped to 64.6% in July from 64.7% in June.
Underemployment has also been a persistent problem in this recovery, and it didn't improve last month. This alternative measure of unemployment, which includes both part-time workers who want full-time work and discouraged workers, held steady at 16.5%.
Manufacturing Keeps Adding Jobs
July's report did contain a few bright spots. The average workweek increased by 0.1 hour to 34.2 hours. Average hourly earnings increased 4 cents to $22.59 per hour.
Also, the manufacturing sector -- which has led the U.S. economic recovery to date -- added 36,000 jobs and has now created about 172,000 jobs since December 2009. Health care rose by 27,000 jobs and has now added 231,000 jobs in the past 12 months. Transportation/warehousing added 12,000 jobs, and mining rose by 7,000.
However, retail added just 6,700 jobs. And temporary positions -- a rise in which historically has preceded increases in permanent positions -- dropped by 6,000 in July. Also, the financial services sector lost 17,000 jobs, professional/business services lost 13,000 jobs, and construction lost 11,000 jobs.
Despite a few positive sectors, the overall state of the U.S. labor market has to be characterized as still weak. About a year into the recovery, the U.S. economy still isn't creating the roughly 150,000 to 200,000 private sector jobs per month needed to reduce unemployment and help the recovery ascend to a self-sustaining status.
U.S. Productivity Cuts Both Ways
One of the ironies of the U.S. economy, and a factor that's complicating the employment situation, is that one of the nation's strengths -- productivity -- is a two-edged sword.
Aided by technology and perpetual expense discipline, among other factors, U.S. productivity continues to increase at an impressive rate --at a 3% pace in the last 12 months and at a 4% rate in the first quarter of 2010.
The upside is that corporate earnings have been boosted, and that's enabled many U.S. companies to amass healthy amounts of cash -- factors that are bullish for stock prices and give many corporations an advantage over foreign competitors.
But during the early post-financial-crisis era, the downside of that increased productivity is becoming more clear to economists and job-seekers alike: High productivity and more-efficient business models mean many businesses don't have to hire as soon or in the volume they did during past recoveries.
The result is fewer new jobs than the nation would typically see early in an expansion. At minimum, it's certainly delayed hiring by super-efficient firms. And so far during this recovery, it has kept the U.S. unemployment rate from finding the down-slope.
Innovation Could Save the Day -- Again
Of course, the compelling question for investors and job-hunters alike is: What will it take to get the great American job-creation machine rolling again?
DailyFinance's Peter Cohan makes a strong case that the key is technology-led growth, or innovation, and if history offers any precedent, these forces will likely play a pivotal role again.
That's not to sugarcoat the task ahead for the nation. Seven million Americans were looking for work before the start of the 2007-2009 recession that eliminated roughly 8 million more full-time jobs. Add those millions of underemployed people, and the result is an enormous job hole.
But investors and job-seekers should also note this: After each period of job loss, the U.S. economic system has shown a remarkable ability to adapt, reorganize and find new engines of growth. After each economic upheaval the country has endured, the U.S economy adapted and retooled. Americans retrained, and new sectors were discovered. Chances are they will again.