Unemployment Rate Drops, In This Case Sucks, As Economy Staggers
The nation’s unemployment rate dropped to 9.5%, the government reported Friday, the lowest level since June 2009.
That is terrible, depressing news when you consider 652,000 left the labor force after failing to find jobs. About 1.3 million of the 6 million unemployed have exhausted their unemployment benefits.
The data released by the Labor Department Thursday and Friday in many sectors indicates to me that what gains we made as an indirect result of Congress’s $787 billion stimulus package in March 2009 has evaporated as money and programs run out.
Employers cut 125,000 jobs in May and the federal government 225,000 temporary Census takers. Private businesses hired 83,000 new workers, up from 41,000 in April.
“It could have been worse, but it wasn’t good,” said Nigel Gault, chief U.S. economist at IHS Global Insight, an economic forecasting firm. “It’s adding to the evidence that growth has slowed.”
Factory orders which had been nudging upward for five months dipped 1.4%.
Here are word bites I culled from the financial reports:
— The nation still has 7.9 million fewer private payroll jobs than it did when the recession began. It takes about 125,000 new jobs a month to keep up with population growth.
— Counting those who have given up their job searches and those who are working part time but would prefer full-time work, the underemployment rate edged down to 16.5 percent from 16.6 percent in May.
–The number of pending home sales plunged 30% in May from April, to the lowest level since at least 2001, an industry group reported Thursday, reflecting a larger-than-expected fallout from the expiration of the federal tax credit for home buyers.
“The general tone has darkened over the past month,” said Sophia Koropeckyj, an analyst at Moody’s Economy.com, which this week estimated the odds of a return to recession at 1 in 3, up from the previous estimate of 1 in 4.
A happier forecast:
— After a series of strong economic data early this year, recent reports have been more mixed, but that hasn’t altered the fundamental outlook for the economy, said Ken Matheny, a senior economist at Macroeconomic Advisers, a forecasting firm based in St. Louis.
“It hasn’t shaken our belief for a solid, sustainable recovery,” he said, noting that business investment remained solid and consumer spending was holding up fairly well.
Back to the gloomier side:
— By all accounts, the broader economy has been recovering since last summer, powered by government stimulus funds and an upturn in manufacturing. But the rate of growth has fallen from 5.6% in the fourth quarter of last year to half that pace in the first three months of this year.
— The reports renewed fears among economists that the housing market could be headed for more trouble now that the home-buyer tax credit is no longer fueling the real estate market.
The National Assn. of Realtors’ pending home sales index, based on the number of contracts signed to buy previously owned homes in the U.S., dropped to 77.6 in May from 110.9 in April. It was the lowest point since the index was created in 2001.
Lawrence Yun, the trade group’s chief economist, said June and July’s numbers were also likely to be sluggish. But if pending sales don’t begin rising by August, the housing market could be headed for a more prolonged decline, he said.
“We need to see a steady rise in that figure,” Yun said.
To a large extent, the housing market depends on the job market – because to buy a home, people need to have money coming in and the confidence that they won’t lose that income.
“The housing market just can’t stay on stimulus medicine forever,” Yun said. “What is really needed is jobs.”
— Investors’ willingness to lock up their money in bonds at such low rates — 2.92% for 10-year Treasury notes — typically is a sign that they expect the economy to slow sharply.
A beleaguered President Obama did his best Friday to brighten a gloomy forecast by announcing a nationwide project to expand broadband Internet access in rural areas. He said it would create 5,000 private sector construction jobs in the short term and ultimately benefit “tens of millions” of people.
And where does that money come from? The remaining portions of the $787 billion stimulus package.
Cross posted on
Posted comments are welcome and automatically go to my email address at [email protected] Remmers’ varied career spans 26 years in the newspaper business. Read a more thorough resume on The Remmers Report.