Today’s release of current unemployment rates may be more unwelcome news reminding us of a rickety economy, but the skies could grow darker still. Goldman Sachs forecasts that the U.S. unemployment rate will peak at 6.4 percent late in 2009 before improving, meaning the painful process of shedding jobs may be only half-way done.
The Labor Department Thursday reported the national unemployment rate stayed at 5.5 percent in June, and nonfarm payrolls shed 62,000 jobs, marking the sixth straight month of job losses. Some other numbers worth noting:
- In May, the current nemployment rates climbed one-half of a percentage point, the biggest one-month jump in 22 years. Some economists had said the jump was a statistical fluke.
- Over the last year, the national unemployment rate increased a full percentage point.
- In terms of industries, job losses in June continued in construction, manufacturing, and employment services, while health care and mining added jobs.
- Overall, nonfarm payrolls have fallen by 438,000 in the first half of the year, an average of 73,000 per month.
The news follows Congress’s approval last week of a measure providing an unemployment extension to the approximately 1.55 million unemployed workers who exhaust their regular 26 weeks of unemployment benefits. President Bush earlier this week signed the bill that includes the unemployment extension of an additional 13 weeks.
What Does the Currrent Unemployment Rate Say About our Economy?
The report was mostly in keeping with forecasts from economists, who had been expecting employers to reduce payrolls by around 60,000 jobs in June and for the current unemployment rates to slip a notch to 5.4 percent. But television news reports showed some experts saying the report was weaker than expected, while others were saying the report wasn’t terribly grim, and the market would breathe a sigh of relief.
David Leonhardt, a New York Times Columnist who writes about economics and business, offers a different take. He suggests that layoffs and unemployment are being touted as a symbol of everything that’s wrong with our economy–but it’s nothing more than a myth. In his column yesterday, Leonhardt says layoffs have “very little to do with the economy’s problems.” In 2007, companies actually cut far fewer jobs than they did during the boom in the late 1990s.
Unfortunately, gross job gains — the new jobs created — have fallen more sharply than job losses. Companies have gone on a “hiring strike,” notes Ed McKelvey, a Goldman Sachs economist. Existing firms aren’t expanding much, and not enough new firms are starting. The country is suffering from an innovation deficit.
The problems plaguing our economy, he suggests, are too complicated to be explained away by current unemployment rates or job losses–and solving them will require “some real work.”
- The Employment Situation: June 2008 (Bureau of Labor Statistics)
- BLS Commissioner’s Statement on the June 2008 Employment Situation (Bureau of Labor Statistics)
- June Payrolls Shrink (The Wall Street Journal)
- Employers Cut Workers for a Sixth Month (The New York Times)
- Dispelling the Myths of Summer (The New York Times)
- Deepening Cycle of Job Loss Seen Lasting Into ’09 (The New York Times)
- Congress Sends Bush Unemployment Extension (The Salary Reporter)
- A History of U.S. Unemployment Rates (The Salary Reporter)
- Looking for a Crystal Ball on the Jobs Front, and Turning Up Short (The Salary Reporter)
- Starbucks to Shut 500 More Stores, Cut Jobs (The Wall Street Journal)