Washington, D.C. – The national employment situation has worsened, as confirmed by the May jobs report issued by the Bureau of Labor Statistics (BLS). The BLS’s report was released on Friday, June 3, 2011, and it indicated that job growth has slowed substantially. In May, employers added only 54,000 jobs. To keep up with population growth, the national economy must add approximately 100,000 jobs per month for the unemployment rate to decline. Accordingly, the national unemployment rate rose from 9.0% to 9.1%.
The prospect of another jobless recovery or another recession now looms larger. While the national economy continues to grow–albeit at low levels–and corporate profits grow at record levels, unemployment is high and increasing. If unemployment increases enough to substantially affect consumer demand, the economy could begin a new recession.
Moreover, the ranks of the long term unemployed are growing. The number of long-term unemployed individuals (jobless for 27 weeks or more) rose to 6.2 million. Forty-five percent (45.1%) of the unemployed have been out of work for more than 27 weeks. Extended periods of unemployment make it harder for individuals to retain job skills and re-enter the job market.
In addition, revisions in the March and April jobs statistics indicated that job growth in March and April was not as strong as previously thought. (At the beginning of each month, the BLS releases a preliminary job report on the prior month’s employment situation, and then subsequently revises the report based upon additional information provided). The jobs figures for March were reduced by 27,000 jobs and by 12,000 jobs for April.
The public policy question now presented is whether the government will take additional steps to improve the employment situation. With the Federal Reserve lending money to banks at close to zero percent interest in order to provide stimulus, the limits of monetary policy (control of the money supply) may have been reached. Increased government spending, as part of a fiscal policy response, may not be possible, given the current interest in Washington on cutting spending.
If unemployment continues to rise, policy makers may have to confront a broader set of questions about the employment situation and how it has been affected by policy decisions made over the past few decades.