High Unemployment: Get Used To It
Today's monthly jobs report suggests two key pieces of the economic picture are likely to persist in the coming months: high unemployment and low interest rates.
Hundreds of thousands of temporary workers hired to help conduct the census accounted for the overwhelming majority of jobs created in May. But they will once again find themselves out of work later this year.
These weekly figures from the Census Bureau suggest the number of temporary workers employed by the census hit its high point the first week of May -- during the same period that the labor department took its monthly jobs survey -- and has already begun to decline.
"I do think that we have peaked," a Census spokesman told The Hill this week. "I do not expect it to go back up."
In 2000, during the last census, the census department added 348,000 jobs in May, then cut 225,000 jobs in June.
Meanwhile, state and local governments cut jobs in May. That trend is likely to continue in the coming months, given widespread budget deficits, the Wall Street Journal says.
And private-sector job growth was anemic in May -- 41,000 jobs, down from more than 200,000 in April, and not enough to drive an economic recovery. (The number of jobs in manufacturing and temporary services increased, but the number of jobs in construction fell.)
"Remember, it requires 150,000 to 200,000 jobs [per month] in order to reduce that unemployment rate," Bill Gross, who manages the bond fund Pimco, told Bloomberg News.
The unemployment rate fell from 9.9 percent to 9.7 percent in May, but the decline was largely due to the fact that fewer people were looking for work. (The unemployment rate only includes those who are actively seeking employment.) Before the recession, the rate was less than 5 percent.
High unemployment, in turn, means the Federal Reserve is likely to keep interest rates ultra-low. This is true for a few reasons.
For one thing, when more people are out of work, consumers spend less money. That lowers the risk of inflation, which can be a byproduct of low rates.
For another, low interest rates make it more appealing for businesses to borrow money to drive growth, which creates new jobs. At least in theory.
"[W]e are now in the fourth quarter of economic expansion, with jobs once more being created rather than destroyed," Fed Chairman Ben Bernanke said Thursday. "Nonetheless, important concerns remain. One particularly difficult issue is the continued high rate of unemployment."
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