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On the face of it, it looks like we have left most of the financial crisis behind us. But America's long-term economic health seems in question, thanks to staggeringly (and persistently) high unemployment and the country's hitting its debt ceiling.
June's jobless rate clocked in at an exceedingly high 9.2%, as reported by the U.S. Bureau of Labor Statistics. Hiring by American employers was the slowest it's been in nine months.
In fact, the addition of 18,000 jobs in June was the lowest since September 2010. High unemployment is definitely an indicator of the economy's ordeal. It also raises questions about business growth in general. Unemployment adversely affects consumer spending, which results in lower demand for goods and services. This results in a fall in overall output.
In such circumstances, most companies would cut down on expenditures. Some resort to layoffs. Let's take a look at how different industries are grappling with the mayhem, and which one is poised best to dodge it.
The U.S. banking industry seems to be struggling because of stringent regulations and underperforming business segments. Banks are doing away with redundant positions in great scale to make optimal use of capital.
American banking giant Goldman Sachs (NYSE: GS ) is planning to cut around 230 jobs for "economic reasons." The bulk of its recent hiring has been international.
Bank of New York Mellon (NYSE: BK ) intends to slash 124 jobs in its treasury services operations. On exiting its subprime mortgage business in July 2010, Wells Fargo (NYSE: WFC ) announced plans to shed 2,000 positions.
In spite of growth in fabricated metal products, the basic materials manufacturing industry's overall growth was offset by a loss of 5,000 jobs in wood products. Surprisingly, the construction industry, which has lost 474,000 jobs since 2009, looks a bit more stable at the moment.
Residential and commercial building companies, however, witnessed a drop of 15,900 jobs from a year earlier. As Meritage Homes (NYSE: MTH ) VP of Investor Relations Brent Anderson said, "It is tough to add people when our sales aren't increasing."
However, all is not lost. In fact, there are quite a few bright spots across industries. Jobs in health care continued to edge upward, for example. The industry added 14,000 jobs in June. It's added an average of 24,000 jobs per month over the past 12 months.
The hospitality industry, which is still recovering, added 34,000 jobs in June. Restaurants experienced 2.1% job growth from a year ago. Food services have added about 216,000 jobs since December 2009.
Fabricated metal products in the manufacturing industry edged up by 8,000 jobs. Strong demand from aerospace and medical equipment makers helped employment grow by 6% from last year.
The numbers show that there's one industry that is blatantly defying the unemployment trend by an even greater degree. Take a look.
The U.S auto industry seems to be on a hiring spree, which is pretty shocking. These companies seem to have bounced back from the brink of collapse in a big way.
While they had to make tough layoffs in order to keep themselves in business, the worst seems to have passed for the automotive industry. Automobile giants such as General Motors (NYSE: GM ) and Honda (NYSE: HMC ) seem to have finally reached a turning point in their industry cycle and now seem oriented toward growth. While GM is hiring 2,500 workers, Honda plans to recruit 1,000. German carmaker Volkswagen recently hired 2,000 workers and expects its new plant to generate another 9,000 spinoff jobs.
Automakers are improving on the earnings front as well. Car sales rose by 1.2 million in 2010, as compared to the preceding year. Strong demand for its fuel-efficient hybrids enabled Ford (NYSE: F ) to report its highest first-quarter profit in nearly 13 years. GM reported a total profit of $3.2 billion. Ohio-based tire maker Goodyear (NYSE: GT ) has been benefiting from its North American tire segment, which accounted for 44% of its revenues last year.
The Foolish bottom line
Despite the slump and greater numbers of job losses to come across the economy, the auto industry has shown resilience and projects a positive outlook. Industry analysts expect the market to increase by nearly 33% in the next four or five years.
The fact that these automakers have resumed production and witnessed growing sales reflects increased consumer confidence and pent-up or growing demand -- at least, in some parts of the world. More importantly, the companies are playing an important role in creating job opportunities, especially at a time when other companies have layoffs on their minds. President Obama said during a speech responding to the latest round of jobless figures that the employment report highlighted a "big hole to fill" in replacing the jobs lost. They need to be filled soon. And automakers seem to be leading the way.