Official Joblessness in May Rises to 9.4% and Well Above Worst Case
Posted by Michael A. Kamperman on June 5, 2009
Unfortunately, the official unemployment rate rose to 9.4% in May. This is ½% over the Treasuries worst case assumptions used in the stress tests for the banks, and it is only May. Significantly, the rate for those without jobs plus those working part-time seeking full-time work rose to 16.4%. There was good news in that the payroll figure showed a loss of 345,000 jobs in May, which is about half of the losses that have been occurring over the last few months. The survey showed a deteriorating jobs picture in the U.S., and the payroll figure showed a surprising slowing in the rate of decline. I will not try to divine which report is more accurate. Time will tell.
What was particularly concerning to me in the most recent report was the figure that government jobs in the month of May declined by 7,000. While this is not a lot relative to the size of government in the economy, it is still a negative number. My concern is that this number should have been way up. While less than 10% of the $789 billion stimulus package has been spent to date, most of what has been spent has been direct aid to state and municipal governments. Combined with the nearly $2 trillion projected federal budget deficit resulting in very large borrowing needs for the federal government, government employment should have gone up. It doesn’t matter whether one thinks growing the government is a good or bad idea. This economy needs something to hang its hat on.
If this trend continues it will indicate state and city revenues have deteriorated to the point that they have to cut jobs even with the extra cash coming from Washington. The country is running huge government deficits to boost the economy, yet it is not enough to have government assume a larger share of the economic pie. Where will growth come from? The only sector in the economy still healthy is healthcare. Yet the goal of the administration is to restrict the growth in this sector. While I agree this makes sense, it only makes sense if we have an alternative sector step up and assume the mantle of growth. If even the government cannot add jobs in this environment, who can?
