Podcast: Discussing the May Employment Report and What it Means for the Economy
I’m Shannon Spillane. We’re joined by the Center’s chief economist, Chad Stone. Thank you for joining us, Chad.
You’re welcome, Shannon.
1. The Labor Department’s May employment report seemed full of twists and turns. Can you help us understand it?
A: Well, you’re right Shannon, that there are complications in interpreting the May employment report. It does offer signs that the worst of the recession may be over, but things are still tough in the labor market. Job losses in May were still high at 345,000 jobs. But this number is less than half what it was in January. So that means that the rate of job losses is slowing and that’s the first step towards a turnaround, but it’s a long way to go before we’re seeing positive job growth.
2. Even though job losses were much lower than expected, the unemployment rate went up more than expected. What does this tell us?
A: Well, that’s correct. The unemployment rate did jump to 9.4 percent when analysts were expecting that it might only rise to 9.2 percent. Now, the unemployment rate statistics come from a different survey from the statistics on job losses. The one asks employers what’s happening to their payrolls and the other asks people about what they’re doing and so the unemployment rate is from the survey of people, asking them are you working or are you looking for work, and there were conflicting trends within that employment report. For the second month in a row, the labor force actually grew as more people came into it looking for jobs, and that’s an encouraging sign. Unfortunately, at the same time, employers were still laying off workers and that overwhelmed the effect of people coming in and so we have these two conflicting forces of people becoming a little bit more confident that they can find a job and coming into the labor force, but not actually finding one, and employers still laying off people, so that’s why the unemployment rate went up.
3. So, even though there were some encouraging signs in the report, the labor market hasn’t yet turned around. What will it take for that to happen?
A: For the labor market to turn around, employers will have to see clear signs that a sustainable economic recovery is underway before they really begin hiring new employees and we’re certainly not there yet. The unemployment rate and job creation figures are what economists call “lagging indicators.” We need to see that the economy is turning around and starting to grow. We see that in industrial production statistics. We see that in the GDP statistics. When they start to turn positive, then employers start to say, “Well maybe this is a sustainable recovery. Maybe I am going to start to see my business expand. It’s time to think about hiring new workers.”
4. Let’s turn for just a minute to people who are looking for a job. How difficult is it for unemployed workers to find a job in today’s economy?
A: Very difficult — more than a quarter of the 14 and a half million unemployed haven’t been able to find a job despite looking for 27 weeks or more. The recovery act that Congress passed in February gives additional weeks, temporarily gives additional weeks, of unemployment insurance to those who exhaust their normal 26 weeks of benefits. But the job market is so poor that many of those workers are likely to use up even these additional benefits before they can find a job. Now, the temporary extension of unemployment benefits is scheduled to expire at the end of the year and we talked about employers needing clear signs that the economy is improving. We may not have those signs even by then. Congress will have to renew the temporary extended unemployment benefits programs at the end of the year when it expires.
Chad, thanks for joining us today.