The US economic recovery is being held down by the unemployment rate. It’s such a problem that despite the fact that the unemployment rate fell from 9.7 percent in May to 9.5 percent in June, more jobs were cut than were created. Jobless Americans out of the labor force are skewing all of the stats within the jobs report. The stock market, accepting the numbers at face value, rose slightly Friday morning. But soon after a decline in factory orders was reported around 10 a.m., the Dow Jones Industrial Average lost about 32.5 points. The turgid U.S. economy is full of conflicting details. Even as job creation, factory orders and consumer confidence fell, many of the manufacturing companies that want to hire can discover workers with the kind of skills they need.
Along with everything else is unemployment rate and consumer confidence
The whole economy is affected by the unemployment rate. An uncertain employment picture wreaks havoc on consumer confidence, which went down a lot in June. The decline in consumer confidence led to a decline in auto sales, and pushed pending home sales off a cliff as tax credits for home buyers expired very quickly. Consumer spending makes up around 70 percent of the U.S. economy, and disposable income is a distant memory for millions of jobless workers.
Why the unemployment rate dropped:
Since July 2009, the unemployment rate reached its lowest point. But it was reported by the Wall Street Journal the decline wasn’t due to improvement in the labor market. With a 125,000 job loss, the unemployment rate really should have increased. But 652,000 people gave up looking for a job — the sharpest one-month decline in 15 years within the Labor Department’s survey. Some may be choosing other opportunities like school. Some are at the end of their unemployment benefits. In the last 2 months, 1 million people stopped looking for work.
New jobs appear to be a mismatch for unemployed workers
The unemployment rate remains stubbornly high because plenty of people are nevertheless applying for the jobs. As outlined by the New York Times, the problem is a mismatch between the kind of skilled workers needed and also the ranks of the unemployed. During the recession, domestic manufacturers accelerated the long-term move toward more automation, laying off their lowest-skilled workers and replacing them with cheaper labor abroad. Now these companies need to hire individuals who can operate really new and hard computerized machinery, follow complex blueprints and demonstrate higher math skills than old-school assembly line workers.
A silver lining within the jobs report?
You are going to have to try really hard to be good about the recent jobs report. According to the Washington Post, Friday’s jobs report could mean the economic recovery that began last year has lost momentum, but the numbers are not so bad as to suggest the nation is heading into a double-dip recession. The numbers, although weak, show just how far the U.S. economy has fallen. The job growth number, for example, is a decline from stronger levels in March and April, but the June job creation number of a mere 83,000 is better than any month out of the past 31, other than the last two.
Discover more about this topic here:
New York Times
nytimes.com/2010/07/02/business/economy/02manufacturing.html?_r=1&ref=us
Wall Street Journal
blogs.wsj.com/economics/2010/07/02/why-did-the-unemployment-rate-drop-2/
Washington Post
washingtonpost.com/wp-dyn/content/article/2010/07/02/AR2010070202004.html?hpid=topnews
