RAY SUAREZ: The economy’s struggle to gain momentum showed clearly today in the latest job numbers. Thousands more workers lost their jobs, and unemployment stayed stubbornly high.
People are still looking for work at this jobs center in Arlington, Virginia.
ANSIA DRAYTON, job seeker: I filled out like probably 50 applications, and I have only been called back for five of them.
RAY SUAREZ: And today’s Labor Department report underscored that it is an uphill climb.
The economy showed a net loss of 131,000 jobs in July. That was largely due to the government shedding thousands of temporary census workers. Employers in the private sector added a net total of 71,000 jobs in July, but it would take about twice that many each month to absorb new job seekers entering the work force.
Commissioner Keith Hall of the Bureau of Labor Statistics acknowledged as much at a congressional hearing. But he also found a ray of hope.
KEITH HALL, commissioner, Bureau of Labor Statistics: Though private sector employment wasn’t strong, it did increase this month, and it has increased now for seven months in a row. Manufacturing employment once again edged up, and that’s been increasing now for seven months in a row as well. And that’s actually quite unusual.
RAY SUAREZ: Overall, while earnings have been good, private firms have not ramped up hiring. As a result, the unemployment rate for July stayed stuck at 9.5 percent, and 14.6 million people reported they were looking for work.
Texas Republican Congressman Kevin Brady:
REP. KEVIN BRADY (R-TX): Unfortunately, today, we received more bad news for American workers and their families. The unemployment rate shows no sign of improving. At this slow pace, it will take much of the decade to return to normal employment levels.
RAY SUAREZ: Meanwhile, at that jobs center in Virginia, many on the front lines of unemployment sounded discouraged.
ELLEN ROTCHFORD, job seeker: A lot of prospective employers are saying that they’re getting 40 to 60 resumes for one position. So, it’s — it’s — it’s like winning the lottery, getting a job today.
RAY SUAREZ: President Obama counseled patience as he toured a sign factory in Washington, D.C. He also said, again, that progress needs to come faster.
U.S. PRESIDENT BARACK OBAMA: Climbing out of any recession, much less a hole as deep as this one, takes some time. The road to recovery doesn’t follow a straight line. Some sectors bounce back faster than others. So, what we need to do is keep pushing forward. We can’t go backwards.
RAY SUAREZ: Mr. Obama’s own economic adviser, Christina Romer, agreed, even as she gave notice she’s stepping down from her job. She cited family reasons.
More now about the jobs picture and deciphering what is going on behind the numbers. It comes from two guests who regularly watch these matters for us.
Economist Lisa Lynch is the dean of the Heller School for Social Policy and Management at Brandies University. She’s a former chief economist for the Labor Department and was also a director for the Federal Reserve Bank of Boston. And David Leonhardt is an economics writer and columnist for The New York Times.
Lisa Lynch, what do these latest numbers tell you about the health of the overall economy?
LISA LYNCH, Heller School for Social Policy and Management at Brandies University: Well, Ray, it was obviously a disappointing report that we had today.
We were all expecting a negative employment number, given that the Census Bureau is laying off the temporary workers it hired for the census. But the fact that the private sector only added 71,000 jobs, and we saw a very large downward revision in last month’s employment number of over 100,000 jobs really shows how anemic the recovery has been in the labor market.
The private sector over the last three months has averaged only 51,000 net new jobs that it has added to the economy. And what we really need to see out of the private sector is month after month of 200,000 or more jobs added to the economy.
On top of that, we saw 48,000 jobs lost in state and local government workers. And, there, we’re seeing the consequences of states and local governments trying to balance their budgets. And they’re starting to lay off workers, as the stimulus monies that they received wear out.
So, we’re going to start the school year with teachers being laid off. We’re going to see more police and firefighters and social services workers being laid off at the state and local level, without some additional help there.
There was some good news in the report today, as Commissioner Hall pointed out, with the increase in manufacturing employment. And we also saw increases in mining and health care, and even in the retail sales sector. And that’s what people are going to focus on. What is the consumer doing? Are they buying? As they buy, will employers start hiring more workers, and will we start seeing those 200,000, 250,000 net new job numbers coming out from these monthly reports?
RAY SUAREZ: Well, David Leonhardt, why so anemic, when, earlier this year, we saw six-figure gains in employment for three months in a row? How come that didn’t set off a virtuous cycle?
DAVID LEONHARDT, The New York Times: Yes.
RAY SUAREZ: More people working, more people spending money begets more people working and more people spending money.
DAVID LEONHARDT: Yes, there was a time this spring where it looked like we might get a nice rapid recovery and start to — start to put people back to work.
I — no one knows for sure, but I think the best guess is that recoveries from financial crises are fragile. They’re uneven. Pick your metaphor. And what happened this spring was a confluence of events. We had the European debt crisis. We had the BP oil spill, which wasn’t a huge economic event, but shook a lot of people’s confidence. People weren’t sure how long it was going to go on.
They were not sure how much business in that region would be interrupted. And then we — we had little bits of not-so-wonderful economic numbers coming along as well. And all these things seem to have combined to have made consumers more reticent and then, in turn, businesses more reticent.
And so we have now had three months of a much slower recovery. And now you start to worry that we won’t get that virtuous cycle that you are talking about, and we’re going to have a slow recovery for a long, long way to go.
RAY SUAREZ: But let’s look a little more at that business reticence that you talk about.
DAVID LEONHARDT: Yes.
RAY SUAREZ: We have just come through, by many accounts, a pretty good earnings season. It seems that companies are sitting on a mountain of cash, and yet not hiring.
DAVID LEONHARDT: Yes. That’s correct. They’re sitting on a mountain of cash and not hiring.
That is not completely atypical, though, for a time like this. Companies want to see their profits go up before they extend the hours of their workers. And only then will they then start to hire new people.
And, so, as soon as your business pick up, and as soon as your earnings pick up, you are not going to go out and immediately hire someone new and spend the money that it costs to do a job search and to pay for someone’s health care. And so companies tend to do this with a lag.
The optimistic thing is to think back to the early or mid-’90s, when we got so down about things, and little did we know that we had this technology boom around the corner. I don’t expect that this time. I think we are in for a long slog. But it’s important to keep in mind that you usually don’t feel as if the economy is about to take off, even when it is.
RAY SUAREZ: Lisa Lynch, did we get a foreshadowing a couple of weeks ago, when the consumer spending numbers came in very disappointing? Is this sort of a circuit; no spending means no jobs, and no jobs means no spending?
LISA LYNCH: Well, you know, what we have seen is that households have been increasing the amount of money that they save, for those people who are actually in employment and have a job.
Actually, in this report that we got today in the labor market, we saw that weakly earnings went up. Part of that is due to the fact that workers are working more hours, just as David suggested employers would be doing, is adding more hours, but, also, their hourly wage rate went up.
But what are they doing? They are saving that money, a higher fraction of that. That is a good thing, because we were really spending beyond our means before this recession started. And they’re also getting rid of debt. And that’s a good thing as well.
So, we’re in this process of getting to a new equilibrium on the consumer side, same for businesses. But the point is that everybody is nervous and uncertain, the consumer and businesses.
So, what is — what is it that is going to get everybody excited and willing to — on the business side, to invest in new production and consumers to be confident that they can go out and make the purchases that they want to make?
RAY SUAREZ: Along, David, with the very disappointing job numbers today, we got a sharp downward revision of previous months’ numbers. How does that work, and what does that tell us?
DAVID LEONHARDT: So, the Labor Department goes out and does these surveys. But as more time — and they release the data usually on the first Friday of the month. So, this is the first Friday of August, and they gave us the July numbers.
But more numbers and more data come in after that. And they revise each of the two prior months, in this case June and May. And so what that is telling us is, it is just confirming this message, that the summer has been a different stage in the recovery. The spring was quite strong. The summer has been much weaker. And we saw that today, both in the July numbers, but also, unfortunately, in the May and June numbers as well.
RAY SUAREZ: But that — it is interesting. I could see that there are people working — if there were people working out there that we didn’t know about…
DAVID LEONHARDT: Right.
RAY SUAREZ: … and we finally got to count them. I don’t know how we counted people who weren’t working as working, and now we realize, in June, they weren’t working.
DAVID LEONHARDT: One of the issues with these revisions is that the Labor Department has to make estimates about how many new businesses are starting and how many businesses are closing.
They have a pretty, shall we say, mixed record of doing that at — at times of economic turning points. They tend to overstate growth during bad times and understate it during good times.
RAY SUAREZ: David Leonhardt, Lisa Lynch, thank you both.
LISA LYNCH: Thank you.