Feature Story

January 7, 2008

Job Market Flashing Recession

From Economic Policy Institute:

The unemployment rate jumped up to 5% last month, and non-government payrolls fell by 13,000, in a far weaker job report than was expected, according to the Bureau of Labor Statistics report on the labor market for December 2007.

Total payrolls rose by 18,000 the weakest month for job growth since August 2003, the last month of the jobless recovery.

While monthly values from the BLS Household Survey are too volatile to be reliable, over the year, employment in this survey was essentially unchanged, up 0.2%.

While the jobless rate remains relatively low, at 5%, an uptick of this magnitude (up 0.3%) has historically been either a symptom or a harbinger of recession.

The private-service sector, the core sector of job growth in our economy, added only 62,000 jobs last month, its lowest month since October 2005.

Manufacturing and construction both posted large negatives last month, down 31,000 and 49,000, respectively.

EPI's housing employment index, which includes sectors directly and indirectly related to the housing market (i.e., real estate and credit intermediaries), shows the dramatic turnaround in housing jobs as a result of the bursting housing bubble.

These output gains have not yet, however, translated into job gains.

The softening of the job market has predictably translated into weaker earnings growth for the 80% of workers who are blue-collar in manufacturing and non-managers in services.

Given the decline in home values and the negative national savings rate, it is difficult to see how consumers will be able to provide the needed stimulus to keep the economy from falling into recession, if it hasn't already.

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