Highlights and Lowlights From June's Jobs Report

The abbreviated version of Friday's June jobs report can be told in two words: not good.

The economy created 80,000 jobs last month, with the private sector adding 84,000 positions and governments shedding 4,000.

The report was a "step in the right direction," President Barack Obama said. That's about the best an optimist can gather from the numbers. No single month's employment report should be taken too seriously, but even averaging the past six employment reports together yields a figure of 150,000 new jobs per month. At best, that's enough to keep the unemployment rate flat:

Source: Bureau of Labor Statistics.

The reality for millions is probably worse than this chart does justice. The standard unemployment rate held steady at 8.2% in June. But the underemployment rate, which includes those who have given up looking for work and those working part time involuntarily, has risen in each of the past two months, and now sits at almost 15% (though it's down considerably in the last year).

If we keep adding an average of 150,000 jobs a month, the unemployment rate will effectively never come down. If we double that and add an average of 300,000 a month, it will still take four years to bring unemployment to a healthy rate of 5%. This long, grinding recovery is unprecedented in modern times:

Think about this. If we add 250,000 jobs a month -- far more than we are now -- unemployment would not fall to post-recession levels until around 2020, or 13 years after the recession began. By most measures, unemployment during the Great Depression was back to pre-recession levels by 1941 or 1942, or about 13 years after the depression began. And what drove the new employment boom back then was, of course, World War II -- a jobs fair of sorts no one wants repeated. The employment crash of 2008 and 2009 was so deep, and the recovery ever since so dawdling, that we may look back on this era as the longest employment crisis ever -- including the Great Depression.

This is serious stuff. Drawn out unemployment benders have a nasty tendency to stick around for generations. As Wharton professor Justin Wolfers worried last year:

Typically in the United Sates, if you're unemployed you're unemployed for three months. You get back to work. You didn't lose many skills. In Europe, folks are unemployed for a year, two years.

Today in the United States, people are starting to get unemployed six months and twelve months. They're losing contact with the world of work. And so the problem is that, even when the economy comes back, it's not clear that these folks are necessarily going to be in contact with the labor market, able to pick up jobs even when the economy generates them. …

I'm terrified that if we leave millions of people out there decreasingly engaged with the world of work, structural unemployment may become an American problem in ways it has been a European problem.

There's at least one optimistic rebuttal. We tend to underestimate how fast things change, including for the better. Housing might be that veiled boost in waiting. Warren Buffett said last year, "We will come back big time on employment when residential construction comes back … you will be surprised, in my view, how fast employment changes when that happens." The eminent finance blog Calculated Risk echoed a similar position last week. With housing starts, new home sales, and construction spending all looking up, construction employment "should add to both GDP and employment growth in 2012," the blog's analyst Bill McBride wrote. That isn't happening yet -- construction employment was basically unchanged in June -- but it's not hard to make the case that it must happen soon, and that its potential is underappreciated by most.

That, though, is a forecast. The reality that's here today is different: Millions are out of work, millions more aren't working enough, and millions more are earning meager wages. If we are moving in the right direction, it isn't nearly fast enough.

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Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Follow him on Twitter @TMFHousel. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 09, 2012, at 4:20 PM, damilkman66 wrote:

    I am of the opinion we have hit a permanent inflection point. The great depression was as much about productivity increases as it was about bursting bubbles. WWII really helped, but I wonder if the GI bill helped out as much. For the first time a son of a factory worker could go to school and gain the skills to be a white collar worker in the modern corporation. I have no stats to back this premise up as I make as me surmising not as a claim.

    I believe going forward we need to revaluate how we educate people. WWII was as much about people being educated in new skills as it was about fighting. Recall in the Pacific for every fighting man there were 19 involved just in logistics. I know of too many friends in startups that despite it being the depths of the recession could not find qualified people. Those people who gained skills in figuring out how to move supplies 10 thousand miles probably fit right in as white collar workers.

    It is interesting that costruction was mentioned as the savior of the employment numbers. Interesting in that construction is something that cannot be shipped to China. Is construction the last bastion of the unskilled laborer? I know some work requires skill. But I was suprised how much I could do with one day of training as long as I had the supervision of one expert. What could I have done with a week?

  • Report this Comment On July 09, 2012, at 4:26 PM, TMFMorgan wrote:

    <<Interesting in that construction is something that cannot be shipped to China.>>

    For what it's worth:

    "Bridge Comes to San Francisco With a Made-in-China Label."

    http://www.nytimes.com/2011/06/26/business/global/26bridge.h...

  • Report this Comment On July 09, 2012, at 5:55 PM, cooncreekcrawler wrote:

    ......as are nuclear reactors and other components for the new nukes. I suspect the NRC is scrambling to develop procedures to erect these things, but really don't have the big picture. Large components are usually shipped in on barges and moved to the site on mobile platforms manufactured by the Goldhoffer company. They may not be made in the US either. I didn't look.

    We also have a critical shortage of pipefitters, TIG welders, and other similarly skilled workers WHO CAN/WILL PASS A DRUG TEST. It seems like increased productivity/mechanization comes with the price of needing fewer and fewer people to do the same thing. Like the old joke, "we have done so much for so long with so little, that we can now do anything with nothing."

    I will be interesting to say the least to see how this plays out

  • Report this Comment On July 09, 2012, at 6:15 PM, xetn wrote:

    " By most measures, unemployment during the Great Depression was back to pre-recession levels by 1941 or 1942,.."

    The war "hired" several million men for combat and helped reduce the unemployment rate.

  • Report this Comment On July 09, 2012, at 7:02 PM, damilkman66 wrote:

    I believe the construction the author is talking about is housing. Even if the Chinese get into the manufactured housing market, that is only a small slice of the total construction market. I find this requirement for full employment troubling as real estate and construction are so very cyclical.

  • Report this Comment On July 09, 2012, at 7:05 PM, TMFMorgan wrote:

    <<The war "hired" several million men for combat and helped reduce the unemployment rate.>>

    Correct. That's mentioned in the next sentence.

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