September 7, 2012 (Jobs Byte)
By Dean Baker
Unemployment in construction is only slightly above the overall average
The economy added 96,000 jobs in August, roughly the pace needed to keep even with the growth of the labor force. The jobs numbers for June and July were also both revised down by roughly 20,000 bringing the three month average to 94,000. The unemployment rate dropped to 8.1 percent, but this was entirely due to a drop in the labor force as the reported employment in the household survey edged downward. The employment-to-population ratio (EPOP) dropped 0.2 percentage points to 58.3 percent, only slightly above the 58.2 percent low hit last summer.
The primary losers in August were white men who saw their EPOP fall by 0.3 percentage points. There was little change in employment/unemployment rates for most other groups. Older workers again seem to have done better than other workers, with employment for workers over age 55 rising by 252,000, even as it fell by 371,000 for everyone else.
While most of the news in the household survey was negative, there were a couple of bright spots. The percentage of unemployment due to people voluntarily quitting their jobs, a measure of workers’ confidence in the labor market, rose to 7.5 percent putting it near the winter levels. Also, the number of workers involuntarily working part-time, as well as the number of discouraged workers, both fell, pushing the broad U-6 measure of labor market slack to its lowest point since January of 2009.
It’s worth noting that the rate of unemployment among workers from the construction industry is down to 11.3 percent, which means that this sector is adding less than 0.2 percentage points to the overall unemployment rate. Unemployment among manufacturing workers is below the overall average at 7.3 percent.
There was not much good news on the establishment side. Manufacturing lost 15,000 jobs in August, the first decline since September of 2011. This drop was driven largely by the changed timing of plant retooling in the auto industry, which inflated the July number. However, averaging the last three months together gives an average rate of job growth in manufacturing of just 5,000 per month, which is not a very positive picture.
Retail added just 6,100 jobs after losing jobs the prior two months. Interestingly, there was a drop in employment in building supply stores of 7,900. This is consistent with a drop in construction spending on home improvements reported for July. That would seem to be a surprising story given unusually low interest rates and the recent uptick in house prices. Unusually hot weather may have played a role.
The employment services sector (temps) added just 400 jobs in August, well below its 21,000 average over the last year. Health care also had a weak month, adding 16,700 jobs. This brings the three-month average to just 15,000 compared with an average of 25,000 per month over the last year. The government sector lost 7,000 jobs with 4,600 of these being in education.
The restaurant sector continued to show robust job growth, adding 28,300 jobs. This unusually strong growth can be used to clear up some confusion in news accounts about the nature of the jobs being created in the recovery. A disproportionate share of new jobs have been in low-paying sectors. This should be expected. The quality of jobs is in part a function of the quantity. When the unemployment rate is low, there are still bad jobs being created, but they just go unfilled.
This is well-illustrated by the share of new jobs in restaurants, which is among the lowest-paying sectors. In periods of high unemployment - like the early 90s, the early 00s and the present - restaurant jobs accounted for a large share of employment growth. By comparison, they accounted for a relatively small share of new jobs when the unemployment rate was lower. If the unemployment rate was again near 5 percent, there is no reason not to believe that the mix of jobs would also improve.
Undoubtedly some seasonal factors depressed August’s job number. While September will likely show a better story, job growth is barely fast enough to keep pace with the growth of labor force.