By G C Mays
The most recent employment data (pdf) showed that the economy added 69,000 jobs to non-farm payrolls in May. Non-farm payroll numbers from March and April revised lower to 77,000 and 144,000 respectively. At a press conference on Friday President Obama said,
the private sector is doing fine
and
Where we're seeing weaknesses in our economy have to do with state and local government, oftentimes cuts initiated by, you know, governors or mayors who are not getting the kind of help that they have in the past from the federal government and who don't have the same kind of flexibility of the federal government in dealing with fewer revenues coming in.
Of course he quickly clarified his initial comments. However, I thought it was a good time to take a detailed look at the data and what I found was that while lost tax revenue has certainly put a crimp on the budgets of many states and localities, the total reductions of state and local government payrolls pale in comparison with the job losses seen in the private sector since U.S. non-farm payrolls peaked at 137.86 million in December 2007.
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Source: The Mays Report
Joint federal, state & local government non-farm payroll losses of -408,000, which occurred between December 2007, and May 2012, make up only 8.4 percent of the total -4.84 million jobs that have yet to return. Employment with local governments around the country has easily taken the biggest hit over that time.
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Source: The Mays Report
Since that December 2007 peak private sector non-farm payrolls have not fared nearly as well. In the goods producing sector only the mining and logging industry is showing gains with 98,000 jobs added.
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Source: The Mays Report
The service providing sector shows job gains in the leisure and hospitality as well as the education and health services industries. Given the burgeoning student loan debt and our growing elder population employment growth in these industries make sense.
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Source: The Mays Report
After peaking, non-farm payroll employment plunged to a low of 129.30 million in February 2010, before rebounding to its current level of 133.01 million, which is 4.85 million jobs below their December 2007 peak. These numbers do not take into account the relentless growth of the working age population, which has grown by 9.81 million people between December 2007, and May 2012, to 242.96 million. Of course this is not a new trend. Growth of non-farm payrolls stopped keeping pace with population growth around the turn of the century.
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Source: The Mays Report
After the U.S. labor market peaked in April of 2000 with a labor force participation rate of 67.3 percent and an employment to population ratio of 64.7 percent it began a gradual decline that the financial crises of 2008 simply exacerbated. While the U.S. has not set new lows in these metrics we have not even returned to their mean averages.
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Source: The Mays Report
Based on a working-age population of 242.96 million, reaching the 37-year averages for participation and employment would allow the U.S. to just eke pass its earlier non-farm payroll record of 137.86 million. However, since December 2007, the working-age population in the U.S. has grown at an average rate of 185.6 thousand people per month. The U.S. needs to create roughly 108.7 thousand jobs per month just to support its current employment-to-population ratio of 58.6 percent . For it to return to its long-run average of 61.1 percent the U.S. needs even more new jobs created each month for many months.
Worker participation and usage rates in the U.S. are neither the best nor worst in the world, they are middling. Perhaps being ordinary is not the way one should promote the idea of American exceptionalism.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
