If there was ever a signal to policy makers —- at the Federal Reserve, in Congress, at the White House —- that some action is required on jobs, the August jobs report released Friday by the Bureau of Labor Statistics is it.
As the economy limps into its third year of expansion, it is clear that the current mix of policies isn't doing much to encourage job growth. And in some instances, policy actions are actively detracting from job growth. (In the accompanying interview, watch Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi tell The Daily Ticker's Aaron Task why he believes the Washington is out of bullets on how to fix the economy.)
Here are a few key takeaways from the report.
First, the private sector, left to its own devices, is creating jobs, but at nowhere near the pace needed to create a sufficient number of them. In August, the private sector created 17,000 new jobs, which is dangerously close to zero. The real number was probably higher, since the private payroll numbers were reduced by 45,000 due to Verizon workers who were on strike. Those workers have since returned to work, so those jobs will be added back in September. Factoring out the Verizon strikers, the private sector created 62,000 new jobs in August. That's not catastrophic, but it's not good enough by a long shot. What's more, the jobs figures for June were revised down from a 46,000 gain to a 20,000 gain, while July's figures were revised down from 117,000 to 85,000. The upshot: In hindsight, BLS discovered there were 58,000 fewer jobs than originally thought.
Second , as Europe continues to discover, when the government contracts, the economy and employment tend to contract. Once again, in August, the government sector cut jobs — 17,000 this time. As BLS notes, "Since employment peaked in September 2008, local government has lost 550,000 jobs." With austerity very much in the air, expect more of the same. The repeated calls to cut government spending —- some necessary, some unnecessary —- are having a serious cumulative impact on employment.
Third —- and I hope somebody at the Federal Reserve is reading this —- this report does not bode well for the ability of U.S. consumers to sustain the current pace of consumption. Consumers have proven to be quite resilient in recent months, largely because payrolls, hours worked and wages were all increasing modestly. When you have more people working, for more hours, and at higher wages, that tends to bolster demand. When you have fewer (or the same number) of people working, for fewer hours, and at lower wages, that tends to reduce demand. And that's what seemed to happen in August. BLS reported that the average workweek fell by .1 hour (or six minutes) in August to 34.2. What's more, average hourly earnings fell by .1 percent, to $23.09.
It's possible this awful report was heavily influenced by the multiple disruptions the economy suffered in August — from the debt ceiling and downgrade at the beginning of the month to the earthquake and hurricane at the end of the month. In which case it might be possible to disregard the bad news in this report. But as we noted yesterday, the horrific news flow didn't stop consumers from buying cars and hitting the malls in August.
Maybe somebody —- you know, the central bankers charged with promoting full employment, or the politicians whose reelection next year hinges on jobs growth -- should do something.
Daniel Gross is economics editor at Yahoo! Finance.
Email him at firstname.lastname@example.org; follow him on Twitter @grossdm.
- Bureau of Labor Statistics