In the midst of a "recovery," Americans are still fighting the unemployment odds |
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10 May 2011 |
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U.S. worker productivity growth slowed dramatically in the first quarter of 2011, which is a positive sign for a job market that is only slowly gaining momentum following the last recession. Output per hour in the nonfarm business sector grew at an annual rate of just 1.6% from the previous quarter. Compare this to the 8.9, 6.5 and 6.7% quarterly surges we saw in 2009. We would normally expect to see strong productivity growth as we emerge from recession, and this is particularly true with the wave of extreme cost-cutting and job cuts we saw in the 2008-2009 recession. Companies successfully trimmed expenses and boosted profits with a leaner workforce—but of course, these gains cannot be permanent. Slowing worker productivity means that companies will need to start hiring again in order to increase their output and profits. However, rising non-labor costs may make this more difficult. Soaring commodity costs and the resulting higher expenses that businesses face are factors that could be putting a damper on U.S. job growth. Weekly unemployment insurance claims have come in with surprising upward jumps in the last two weeks, reaching an 8-month high of 474,000 at the end of April. Previously, jobless claims had been ticking down nicely for several months, until we got into April. Although April’s reversals in claims have been largely attributed to special, temporary factors, there is concern that the U.S. job recovery may be stalling. There was also some good news in April. Coming on the heels of the uptick in weekly claims, the monthly employment numbers for April surprised on the positive side, with nonfarm payrolls expanding by 244,000, compared to market expectations for an 185,000 increase. In the same release, the April unemployment rate ticked up to 9.0%, but is to be expected at this point in the recovery as workers re-enter the workforce. It is the length of unemployment that is unique in this job market, however. The number of people out of work for more than six months fell in April to its lowest level since October 2009, but remains at historically high levels. This group currently represents 42% of total unemployment, while this ratio peaked at just 20-25% of total unemployed following the last three recessions. This trend may be a reflection of the type of jobs that were lost in this recession (the time to find a new replacement job is longer the higher the salary sought), as well as the extension of unemployment benefits in some states. It is not surprising that Americans are still pessimistic about their job prospects. Nearly 95% of those surveyed by The Conference Board in their monthly Consumer Confidence Survey responded that jobs are either hard to get or not plentiful. Hopefully the labor market will start to thaw in the coming months as businesses start to ramp up their hiring plans. Click any chart on the right to enlarge. |
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