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In Search of a Silver Lining



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I’m re-reading the June jobs report in search of the proverbial silver lining. I haven’t found it yet, but I’m sure it’s there somewhere — down deep and well hidden. Because so much about this report is just bad.

The unemployment rate climbed to 9.2 percent as the labor-force participation rate declined for the first time since January. Quite simply it means that fewer Americans are looking for work, and those looking aren’t finding jobs.

The payroll survey reported only 18,000 net new jobs. In June, there were only 57,000 new net private-sector jobs, down from 73,000 in May. Job creation in the previous two months was revised downwards by 44,000 jobs, which more than wipes out the total job growth for the month. Hours of work and nominal earnings fell for the first time since last fall, so even workers with jobs are worse off. The weakness of the labor market is evident in every sector, and all indicators of future labor demand are flat as well.

As bad as the payroll-survey results are, the household survey is worse. Adult women in the labor market declined sharply, to the lowest level since 1996. The unemployment rate for adult men climbed 0.2 points, pushing it back over 9 percent. The unemployment rate for all teenagers is almost 25 percent. The household survey also reported 445,000 fewer jobs, and a surge in workers reporting that they had been unemployed for fewer than five weeks.

There is a lot of debate over how much of the weakness in the labor market is due to the business cycle or to a structural change, which is a broader, more permanent change. I believe that cyclical forces are the primary driver in the labor market. However, there are structural changes in play as parts of the economy continue to retool. More importantly, if politicians in Washington continue to rush to adopt European-style regulations and government spending, there can be no surprise when the labor market begins to resemble a European labor market, with rigidity and high unemployment rates, especially for younger workers.

Here’s the silver lining: Professional and technical services have grown over the past couple of months. Except for those in the legal profession.

Rea Hederman is assistant director of the Center for Data Analysis at the Heritage Foundation.



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