Friday, December 3, 2010

Employment Gains Slow

The Lehmann Letter (SM)

Today the Bureau of Labor Statistics announced that the labor market is - at best - treading water:

You can view the data in tabular form at:

There are 15.1 million unemployed and an unemployment rate of 9.8%. The labor market must add 250,000 jobs a month for several years in order to restore full employment.

That's why today's report, that November employment grew by 39,000 jobs. is so disappointing. Employment in government, construction, manufacturing, retail and finance all shrank. Professional and business services and education and health services did grow, but half of those gains were part-time.

Equally troubling: The workweek stopped growing. This is an important leading indicator because employers tend to extend hours for current employees before adding additional workers. The workweek had been expanding strongly and then stalled in November. That could be temporary, and both the workweek and total employment may resume stronger growth this month. Let's hope so.

But it is important to keep in mind that the demand for labor is a derived demand. Hiring depends upon growth in the economy's most depressed sectors, especially residential construction. Homebuilding was ground zero for the bubble, and when that bubble burst it became ground zero for the subsequent recession. It's hard to see how we can return to full employment without a strong recovery in the home-building sector.

© 2010 Michael B. Lehmann

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