Stagnation Summer

by James Sherk

This spring some politicians and economists saw hopeful signs of a “recovery summer” in which private-sector job creation would finally pick up. Today’s employment picture shows that those visions were just a mirage.

The Bureau of Labor Statistics (BLS) monthly employment report shows the economy lost 95,000 net jobs in September. Fortunately, the entire net job losses occurred in government and not the productive private sector. Temporary census employment fell by 77,000. State and local governments also trimmed 83,000 jobs from their payrolls.

Private-sector payrolls modestly expanded by 64,000. However these represent too few new jobs to make a meaningful dent in the unemployment rate, which remained unchanged at 9.6 percent. Unemployment has stayed at or above 9.5 percent for over a year.

Job gains were weak throughout the private sector. The largest job gains came in the leisure and hospitality (+38,000) and health care and social assistance (+32,000) fields. Both the construction (-21,000) and manufacturing (-6,000) sectors continued to lose jobs. Growth in temporary help services employment (+16,900) provided one encouraging sign. Employers often hire temporary workers before committing to full-time employees.

Increases in labor-force participation and the weekly work-week in the spring contributed to expectations of a summer recovery. However, in the summer both these measures stopped improving. Average weekly hours at work (34.2) and the labor-force participation rate (64.7 percent) both remained flat in September.

Worse news came from the BLS’s revisions to its employment figures. Every year the BLS revises its estimates to include data not immediately available in the monthly reports. Preliminary figures show that the economy lost 366,000 more jobs between March 2009 and March 2010 than previously estimated. Accounting for this, private-sector employment has fallen by 7.97 million jobs since the recession began.

Unfortunately, the “recovery summer” could be better labeled the “summer of stagnation.”

– James Sherk is the Bradley Fellow in Labor Policy at the Heritage Foundation.