The Bureau of Labor Statistics reported unexpectedly good news this morning, lowering the unemployment rate to 9.4% and noting a net loss of almost a quarter-million jobs in July. Most analysts tracking the weekly data, where an average of 550,000 new jobless claims a week had been the norm, expected a slight increase over June’s 9.5%. The reopening of car plants following the bankruptcies of GM and Chrysler may account for the difference:
U.S. employers cut 247,000 jobs in July, far less than expected and the least in any month since last August, according to a government report on Friday that provided the clearest evidence yet that the economy was turning around.
With fewer workers being laid off, the unemployment rate eased to 9.4 percent in July from 9.5 percent the prior month, the Labor Department said, the first time the jobless rate had fallen since April 2008.
The government revised job losses for May and June to show 43,000 fewer jobs lost than previously reported.
Analysts had expected non-farm payrolls to drop 320,000 in July and the unemployment rate to rise to 9.6 percent. The forecast was made earlier this week before other jobs data prompted some economists to lower their estimates for job losses.
This may represent the bottoming out of the recession after almost eighteen months. The BLS showed most industries still terminating jobs (except health care and education), but the rate has slowed considerably. Manufacturing losses dropped to 52,000, the first time in 10 months it went below 100,000 in any month. The service industry lost 119,000 following worse-than-expected news about the contraction of that sector.
Unfortunately, that statistic tells only part of the story. According to the BLS, the percentage of Americans of working age with jobs continued to drop. In July, the number was 59.4%, down from 59.5% in June and 60.5% in January. That indicates that long-term joblessness may not get completely captured in the unemployment numbers shown in this report.
The curve still seems to be following the predicted path of an economy without the Porkulus bill, as noted in Christine Romer’s January analysis:
Having the upward trajectory of joblessness slow down does not make a recovery. As Winston Churchill reminded the British after the miracle of Dunkirk, wars do not get won by successful evacuations. Until the economy starts generating a net increase in jobs and not just a lower net decrease, the overall employment rate will creep upwards. The only way for that to happen is to get capital into the markets to create jobs. The stock market has shown some indications lately that capital may finally be getting off the sidelines, but it won’t jump fully back into play as long as the Obama administration insists on pursuing policies hostile to business.
Update: Jim Geraghty and James Pethokoukis throw a dash of cold water and reason on these numbers:
In June, the Bureau of Labor Statistics said the civilian labor force was 154,926,000 people.
In July, 796,000 of those were taken out of their definition of the workforce, and thus their unemployment calculations for this month, because they have stopped looking for work “because they believe no jobs are available for them.” Ten percent of the June workforce would be 15.4 million, 1 percent would be 1.5 million, and so 796,000 is roughly one half of one percent.
In other words, BLS took .5 percent of what you and I would consider unemployed and took them out of their total. And with that, unemployment went down one tenth of one percent.
I recall the Left accusing George W. Bush of doing the same thing in 2002-3 in the unemployment figures — when they didn’t get above 7% or so. I guess it’s now OK to do it.