With gloomy consumers and market uncertainty with the debt ceiling debate, one can be encouraged with July’s latest report. The unemployment rate dropped modestly from 9.2% to 9.1%, and net job creation exceeded expectations at 117,000. Most economists expected jobs to only rise by 75,000 to 90,000. It was also better than June’s dismal total of 18,000. Hopefully, the momentum can continue this month and beyond.
There was a relatively healthy gain in private sector employment and it was across multiple sectors. The highest growth occurred in the following industries:
- Health care: 31,000
- Retail trade: 26,000
- Manufacturing: 24,000
On the downside, government employment continued its declining trend with over 37,000 job losses, though special circumstances contributed to that total. Minnesota’s governmental shutdown caused 23,000 or over 61% of those losses.
Another reason for the decline in unemployment was due to more discouraged workers. This is attributed the the labor force participation rate falling below 64% to 63.9%, along with the employment to population ratio falling to 58.1%. Both figures are at their lowest point during this downturn.
As we look to the future, our policymakers must walk a fine line. We do need credible deficit reduction soon as the growth in entitlements threaten long-term fiscal sustainability, but we need to be careful about implementing it too quickly. If government spending cuts come too quickly, then that may send our economy back into a double-dip recession.