James Pethokoukis of the American Enterprise Institute explains:
The May jobs report was a complete and utter disaster for the economy and, perhaps, President Obama’s chances for reelection.
Employers created just 69,000 jobs last month, the Labor Department said on Friday. That’s the fewest since May of last year. Economists had been expecting nonfarm payrolls to increase by 150,000. (In fact, the result was lower than what any economist polled by Reuters had predicted.)
Moreover, companies added 49,000 fewer jobs than previously estimated in March and April. Talk about a slowdown. The average monthly gain was 226,000 in first quarter vs. an average of just 73,000 in April and May.
Oh, and the U-3 unemployment rate rose to 8.2% from 8.1%. The broader U-6 gauge, which also measures underemployment, rose to 14.8% from 14.5%. The labor force participation rate did, finally, tick up to a still-low 63.8%, lending credence to the idea that the shrinking workforce reflects discouraged workers and not just demographics.
And here’s the forecast: WE’RE DOOMED.
So what is the true state of the labor market?
– If the size of the U.S. labor force as a share of the total population was the same as it was when Barack Obama took office—65.7% then vs. 63.8% today—the U-3 unemployment rate would be 10.9%. (Now, this doesn’t take into account the aging of the Baby Boomers, which should lower the participation rate due to rising retirements. But is that still a valid assumption given the drop in wealth since 2006?)
– If you take into account the aging of the Baby Boomers, the participation rate should be trending lower. Indeed, it has been doing just that since 2000. Before the Great Recession, the Congressional Budget Office predicted what the participation rate would be in 2012, assuming such demographic changes. Using that number, the real unemployment rate would be 10.5%.
– Of course, the participation rate usually falls during recessions. Yet even if you discount for that and the aging issue, the real unemployment rate would be 9.5%.
– We continue to be stuck in the longest period of 8% unemployment or higher since the Great Depression, 40 consecutive months.
– And, as the above chart shows — originally from Obama economists Christina Romer and Jared Bernstein in January 2009 –the current 8.2% unemployment rate is 2.5 percentage points above where Team Obama predicted it would be right now if Congress passed his trillion-dollar stimulus plan.
– The median duration of unemployment rebounded to 20.1 weeks in May, and 42.8% were unemployed for longer than a half year.
– Total hours worked fell 0.2% on weakness in the work week.
– Average hourly earnings rose just 0.1%. Coupled with a very stable overall inflation rate, real wages were likely flat in May.
The big question now: Does this report suggest the U.S economy is heading into recession, especially given the sharp slowdown in global economic activity from Europe to India to, perhaps most worrisome, China?
Consider this: Last year, the U.S. grew at just a 1.7% pace. Research from the Federal Reserve finds that that since 1947 when year-over-year real GDP growth falls below 2 percent, recession follows within a year 70 percent of the time. We are firmly within the Recession Red Zone.
Facebook friend WGB pointed me to this story in CNS News:
The number of American women who are unemployed was 766,000 individuals greater in May 2012 than in January 2009, when President Barack Obama took office, according to data released today by the Bureau of Labor Statistics.
In January 2009, there were approximately 5,005,000 unemployed women in the United States,according to BLS. In May 2012, there were 5,771,000.
[…]The number of women employed in the United States peaked at 68,102,000 in April 2008, according to BLS. The number of women employed in the United States today is 1,216,000 less than that.
Remember, the Democrats got control of Congress in January 2007, and had control of spending in the 2008 fiscal year. My take is that the hiring is still going on in places like Canada and Chile and Sweden, where government isn’t taxing and regulating job creators into oblivion. Companies are still hiring and expanding and drilling for oil – just not here.