People had trouble knowing what to make of yesterday’s U.S. jobs report. The decline in the number of jobs in May was estimated at 345,000, much lower than the declines in previous months. I saw an AP headline that erroneously summarized this by saying that layoffs had slowed. We know that’s wrong because other measures are much better indicators of layoffs and business closings, and they show a steady stream of lost jobs going right up to the present. So instead, the jobs number must indicate an increase in hiring, something on the order of 200,000 jobs.
And this may even be a phantom occurrence caused by difficulties in seasonal adjustments. The labor market normally expands in summer with millions of summer jobs. Memorial Day came as early as possible this year, pushing more of that summer hiring into the month of May. At the same time, it is a challenge to take seasonal data from a period of expansion and try to apply it to the current period, where even in summer, the job count is continuing to decline.
My best guess is that the jobs number represents a flurry of hiring of new college graduates, yet the number of jobs involved, a mere 100,000 to 200,000, indicates that most graduates are still looking for employment.
The unemployment rate in May jumped up to 9.4 percent, the highest since the Reagan recession, yet the employment picture is actually worse than it was then, because so many people are working at part-time jobs. What I am hearing is that many new college graduates are working at the same part-time jobs they held while they were in college.
Doubtless others are seeking the same summer jobs that they had last summer. It will be a challenging time for high school students seeking summer jobs this month, as they have to compete with more experienced older workers, some of them college graduates willing to work for minimum wage.
If my take on this is correct, the unemployment rate could increase in June even more than it increased in May. That would put it at 10 percent, something experts such as myself were not expecting to see until around November.
In previous recessions, we have seen the economy improve a year before employment begins to increase. This recession is different. Consumers have much lower access to credit than just last year, and their interest income is negligible (the average savings account interest rate was 0.22 percent according to the last report from the FDIC), so consumers can only spend the money they get from working. With that constraint, it is hard to see how there can be much of an economic recovery before employment stabilizes.