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Behind the jobs number

To begin to understand why last week’s U.S. jobs report for June landed with such a thud, it helps to do a little math: On a percentage basis, the addition of 18,000 jobs nationwide was a net gain of 0.01 percent.
In other words, zero.
Economists-and many others-were stunned and appalled by the number. To simply keep up with population growth, the U.S. economy needs to add roughly 150,000 jobs a month. To bring down the unemployment rate from its current level of 9.2 percent to around 6 percent, it must average nearly 400,000 new jobs a month for several years.
Why is employment growth falling so far short of these targets? A popular theory is that the economy is plagued by uncertainty-fed by the European financial crises, the looming U.S. debt ceiling deadline, the rollout of myriad health care reform provisions and other factors. Unsure what the future will bring, many businesses are afraid to invest and hire.
No doubt, there’s some truth to this explanation. But it obscures an important fact: Businesses are hiring more workers, and they have been doing so since March 2010. In June, they added 57,000 jobs-a modest but not insignificant number.
So, why a net gain of only 18,000 jobs? Because the public sector shed 39,000 jobs last month. Indeed, since the recovery began, state and local governments have cut roughly 500,000 jobs.
And in places where the cuts have been made, the impact has been noticeable. In its latest MetroMonitor report, the Brookings Institution notes that "nearly all the metropolitan areas whose economies suffered the least since the start of the Great Recession had increases in government employment, while most of those that suffered the most lost government jobs."
Brookings lists Rochester among the 20 strongest-performing metro areas since the recession began. Over that period, this region has lost private-sector jobs but government jobs have held steady. The result: a decline of less than 1 percent in total non-farm jobs, which helped earn the Brookings recognition.

Voters want leaner, more efficient government. But in the here and now, a lost job is just that, and there’s no point in pretending public-sector downsizing is not a drag on the economy.

7/15/11 (c) 2011 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or e-mail rbj@rbj.net.


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