The 69,000 Discrepancy

by Martin Denholm, Senior Editor
Monday, June 7, 2010

Ah, just when you thought it was safe to declare the U.S. economic recovery in full swing…

Data from the services and manufacturing sectors provided the big tease, with the Institute of Supply Management stating that the crucial service sector enjoyed its fifth straight month of growth in May.

Score one for Team USA.

The manufacturing sector added to the positive vibes, with the latest Commerce Department report showing that factory orders climbed by 1.2% in April. Leading the charge was a big jump in orders for commercial aircraft.

Score another point for Team USA.

But lest we get carried away…

April Showers, As U.S. Job Report Rains on the Parade

The first Friday of the month is always an eagerly anticipated day in economic circles, as it heralds the Department of Labor’s (DOL) monthly job report.

Awaited with trepidation when the U.S. economy was deep in recession and the economy was losing hundreds of thousands of jobs each month, the DOL’s report has become a more welcome event in recent months, as the economy has rebounded.

And so it was for the May job report, with analysts projecting 500,000 more jobs.

Only off by 69,000, fellas.

The economy actually generated 431,000 jobs. On the surface, that’s a decent figure, but look deeper and you’ll see that 411,000 of them were temporary positions at the U.S. Census Bureau.

Another reason for the analysts’ shooting well wide of the mark is that with the economy recovering, more long-term unemployed people (categorized as out-of-work for 27 weeks or more and a total of 6.8 million in April) are now job-hunting, so the workforce has grown larger. The report showed that there were 15 million unemployed Americans in May.

There’s no doubt that new job growth in six out of the past seven months is a solid trend. But remember, there were eight million jobs lost during the recession. And quoted on the BBC, Mark Zandi, Chief Economist at Moody’s Analytics, states, “It is going to take a long time to get back the jobs we lost [in the recession].”

How long? Until 2013.

While it’s a lagging economic indicator and doesn’t typically reflect a stronger economy until after the growth has occurred, the U.S. job report remains one of the most important and closely watched gauges of the country’s economic health.

In that respect, it will be interesting to see what shape the job market takes over the summer – a time when an influx of seasonal workers traditionally hits the market. Will companies have a need to hire more temporary staff in order to satisfy consumer demand for goods and services? The first Fridays of the month will tell the tale of the tape.

Best regards,

Martin Denholm

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