In his latest commentary, the National Restaurant Association's Chief Economist Bruce Grindy analyzes the August job report. While the recent anemic employment figures don’t necessarily mean the economy is headed for a double-dip recession, the odds are certainly increasing.
Each month in the economy – in good times and bad – hundreds of thousands of jobs are added and hundreds of thousands of jobs are lost. The net difference is the closely-watched figure that gets reported by the U.S. Department of Labor each month, and is widely viewed as a key measure of the economy’s health.
Earlier this year, the recovery was gathering momentum, with the economy adding more than 700,000 jobs during the first four months of the year. Conditions then deteriorated quickly, as only 158,000 jobs were added in May, June and July.
In August, the net change in total non-farm employment was zero. Other than being an interesting piece of trivia for economists – a month reading of zero last happened in 1945 – what does this mean for the economy? While it doesn’t necessarily mean the economy is headed for a double-dip recession, the odds are certainly increasing. Even if the continued losses in government jobs are excluded, the net private sector gain of 17,000 jobs in August was the weakest performance since the employment recovery began in March 2010. The trend is clearly moving in the wrong direction.
In addition to showing a stalled labor market in August, the jobs report also revealed some troubling indicators for existing workers. The average weekly hours worked by private sector employees declined by 0.1 hour to 34.2 hours in August, the lowest level since January. Taken together with a 0.1 percent decline average hourly earnings, the weekly earnings of private sector employees fell by 0.4 percent in August. Multiplied across the entire workforce, these declines impact households’ ability to spend, which further exacerbates business’s unwillingness to expand payrolls.
For its part, the restaurant industry contributed to the employment picture on the plus side in August. Eating and drinking places added a net 9,300 jobs in August on a seasonally-adjusted basis, which represented the sector’s strongest gain in four months. While any positive news is welcomed at this point, it will take broad-based job growth to get the economic recovery back on track.
Monthly Growth in U.S. Total Non-Farm Employment
Source: Bureau of Labor Statistics; figures are seasonally-adjusted
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