Saturday, June 4, 2011

May unemployment may signal big problems: Black unemployment rises to 16.1%; National rate at 9.1%

The May unemployment report was close to shocking. Only 54,000 net new jobs were created. The national unemployment rate rose to 9.1% and the Black unemployment rate rose to 16.1%. Economists has predicted between 125, 000 and 175,000 for the month. The national GDP grew only 1.8% on an annual basis foreshadowing the poor report.

Private non farm payroll increased 83,000 just one-third of 251,000 new jobs added in April. Employment increased in business services by 44,000 and healthcare by 17,000. Manufacturing lost 5,000 jobs and Construction added 2,000. The biggest drop was in local government jobs which fell by -28,000.

The US economy has lost about 7 million jobs since the beginning of the recession in December 2007.

The reaction

The unexpectedly low number of new jobs worried the financial community (DJIA dropped 100 pts) and some in the political community. Read Austan Goolsbee here. He is head of the council of economic advisers to the President.

Media coverage was light. Google trends report a 1.66 index for the term "Unemployment" as compared to 6.97 for "President Obama" and 24 for the term "Kardashian".

Black Unemployment Up Again

Black unemployment (BU) increased again to 16.1%. It was 15.3% in Feb. 2011. The 16.1% was close to the BU peak of 16.5% in Mar/Apr 2010. As recently as Jan 2007, the BU rate was 7.9 percent. That is an astounding 100% increase in four years. Sadly, the "Real" Black unemployment rate which is the the "Black U6" was still 23%. Basically, 23% of the Black labor force wanted work and could not find it.

Black U6 is an approximation computed from adding the difference between US national U3 and U6 plus the Black unemployment rate. The assumption is the difference between the US population for U3 and U6 would be the same for the Black populations U3-U6. Truth is: Black U6 is probably higher. The chart below provides a graphic explanation.

The unemployment rate for Black men (20+) was 17.5 and Black women 13.4%. 7.8 million Black women are employed vs. 6.6 million Black men. In other words, more than 1.2 million Black women work than Black men. One million more Black women are in the labor force that Black Men (about 9 million vs. 8 million men)

2.88 million Black people were unemployed in May, 2011 about the same number as April. The Black labor force participation rate was reported at 61.1%. In February 2010, it was 62.7. The number of Blacks holding jobs shrank by 178,000. An additional 621.000 Blacks have dropped out of the labor force. The
In other bad news, the long-term unemployed (out of work for more than 26 weeks) increased to 361,000 to 6.2 million. The long term unemployed are 45% of the total unemployed.

Part-Time, Long-term and Discouraged Workers

The number of part-time workers for economic reasons was unchanged at 8.5 Million. These are people who would like full-time work but cannot find it. Marginally attached workers stayed around 2.2 million. These are people who have looked for work in the past 12 month but are not counted as part of the labor force.

The number of discouraged workers dropped year-to-year. Last May there were 1.1 million. Currently there are 822,000 discouraged workers, a 24% drop. Discouraged workers have stopped looking for work because they believe no work is available for their skills.

Establishment Data

Non farm Payrolls increased by 54, 000. The private sector added only 83,000 jobs which were reduced by government reductions. Retail trade stores added lost -8,500 jobs, business and professional services added 44,000, and health care added 17,000 and manufacturing lost -5,000.

Here is the overall NFP view of the new jobs. Increases in private hiring were offset by the loss of local government jobs.

Here is a breakdown of non farm payroll by category. You can see the growth came from healthcare and the drag was local government layoffs.

Temporary help is a closely watched, bell-weather category. It grows during a recession as employers are unwilling to make the investment of hiring long term employees. When the economy picks-up, the demand for temporary help drops. Lately, as employers use of “temps” has changed, temporary help has stayed strong.
Temporary help was flat meaning that employers were hiring rather than using temporary help services.

Construction added 2,000 jobs. Construction related jobs are a key part of the economy.

March NFP was revised down 221,000 to 194,000 and Aprils number was reduced from 244,00 to 232,000

On Thursday, the DOL released weekly unemployment claims figure as 422,000. Still above 400K and well above 250K which is the full employment base figure. ADP reported 38,000 new jobs were added.


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