Tea Leaf: More jobs, less recession risk

Published: Wednesday, Oct. 12 2011 1:00 p.m. MDT

In this Feb. 1, 2011 photo, an unemployed man takes a roll call at the Day Worker Center of Mountain View in Mountain View, Calif.  (Paul Sakuma, Associated Press) In this Feb. 1, 2011 photo, an unemployed man takes a roll call at the Day Worker Center of Mountain View in Mountain View, Calif. (Paul Sakuma, Associated Press)

The September employment report was somewhat better than expected. September job gains, plus upward revisions to job gains during July and August, will lessen the discussion of an imminent return to recession. Our view all along has been that we will avoid another recession, although U.S. economic growth will be frustratingly weak.

At the same time, American job creation in an economy aided by massive, gigantic, and unprecedented stimulus should be much better. Too much government is part of the problem, not part of the solution.


The American economy added 103,000 new net jobs during September, versus forecast expectations closer to 60,000 jobs. As we knew going into the report, 45,000 "new" jobs would simply be the return of Verizon workers to the workplace, following a strike.

Perhaps most noteworthy within the report was sharp upward revisions to previously reported job estimates for July and August. The net addition of 99,000 jobs during these two months is meaningful. July's gains were revised from 85,000 net new jobs to 127,000, while August's initial report of no ... zero ... zip ... nada jobs was revised up to 57,000 jobs.

Annual stuff

The U.S. economy — until estimates are revised again — has added 1,074,000 net new jobs to-date in 2011, an average of 119,000 monthly. Such totals compare to the addition of 940,000 net new jobs in 2010, an average of 76,000 jobs monthly.

The addition of slightly more than 2 million jobs during the past 21 months now offsets only one-fourth of the more than eight million jobs lost in 2008 and 2009 alone. There remains much to do.

The nation's unemployment rate remained at 9.1 percent for the third month in a row. The jobless rate has averaged slightly above 9 percent for the past three years.

As we will hear multitudes of times as we approach the 2012 presidential election, no president since Franklin D. Roosevelt in the late 1930s has ever been re-elected with an unemployment rate above 7.2 percent ...

... we are at 9.1 percent,

... even the best estimates for late next year are no better than 8.5 percent, with most slightly higher,

... there is a valid reason President Barack Obama is aggressively pushing a costly jobs program,

... similar reasons suggest the president will support additional employment programs during the next year,

... it ain't rocket science.

The nitty gritty

The nation's goods production sector saw the addition of 18,000 net new jobs in September, led by 26,000 new jobs in construction. The rise was the best in seven months and was led by a jump in non-residential construction activity.

The nation's mining and logging sector added another 5,000 jobs. Not so hot was the loss of 13,000 manufacturing jobs during the month, the largest decline in 13 months.

The nation's private service providing sector added 119,000 net new jobs in September, led by 48,000 new jobs in professional and business services. The nation's education and health services sector added 45,000 jobs.

The government sector lost another 34,000 jobs in September, with 24,400 of them in public education. The American Federation of Teachers notes that 277,000 education jobs have been lost since 2008, with another 280,000 more job losses likely to occur during the next year due to state and local budget cuts, according to The New York Times.

Other details

 Total unemployment remained at roughly 14 million people.

 The number of people out of work for more than 26 weeks rose by 208,000, to 6.24 million.

 The "underemployment" rate, which includes the unemployed, those working part-time who would prefer to work full-time, and those discouraged workers who have stopped seeking a job but would take one if offered, rose to 16.5 percent, the highest level this year.

 Average hourly earnings for all employees on private non-farm payrolls rose by four cents (0.2 percent) to $23.12. The rise of 1.9 percent during the past 12 months is just one-half of the 3.8 percent rise in consumer prices during the past year, leading to further strains on consumer spending.

 Better news saw the average workweek rise by 0.1 hours to 34.3 hours. While seemingly inconsequential, it equates to the addition of another 140,000 jobs within the economy.

Other breakdown

The unemployment rate for adult men dipped to 8.8 percent in September from 8.9 percent the prior month. The unemployment rate for adult women rose to 8.1 percent in September from 8.0 percent in August.

The unemployment rate for teenagers declined to 24.6 percent in September from 25.4 percent in the prior month. Still, with one out of every four job-seeking teenagers out of work, their ability to build critical workplace skills is severely diminished.

The jobless rate for whites was unchanged at 8.0 percent. The jobless rate for blacks or African Americans declined from 16.7 percent to 16.0 percent ... but such a level is way too high. The jobless rate for those of Latino or Hispanic ethnicity remained unchanged at 11.3 percent.

Education connection?

Anyone questioning the value of education in the workplace need look no further. The unemployment rate for those with less than a high school diploma was 14.0 percent in September, while the rate for high school graduates with no college was 9.7 percent.

The unemployment rate for those with some college or an associate degree was 8.4 percent, while the unemployment rate for those with a bachelor's degree or higher was a low 4.2 percent.

Policy matters

An editorial in the Oct. 8, 2011, issue of The Wall Street Journal noted the slightly better prospect for the economy with the release of the September jobs data. However, it also drew a contrast.

The editorial noted, "As it happens, the biggest one-month jobs gain in American history was at exactly this juncture of the Reagan Presidency, after another deep recession. In September 1983, coming out of the 1981-82 (economic) downturn, American employers added 1.1 million workers to their payrolls, the acceleration point for a seven-year expansion that created some 17 million new jobs."

"The difference between then and now isn't the magnitude of the recessions but the policies the U.S. pursued to restore growth. In the Reagan expansion, spending and tax rates were cut, regulations were eased, and government was in retreat. Today, we've had a spending and regulatory boom, the threat of higher tax rates, and a general antibusiness political climate. Policies have consequences."

... "Policies have consequences."

Jeff Thredgold is the chief economist for Zions Bank and founder of Thredgold Economic Associates, a professional speaking and economic consulting firm. Visit www.thredgold.com.

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