Friday, August 5, 2011

US Unemployment Falls to 9.1% in July

The news that the US economy added 117,000 jobs is welcome indeed. I, for one, was dreading another weak report.  But there was a time when such a number, barely enough to keep up with population growth, would have been a big disappointment.  And in this lies the main problem right now with the US economy - we are not making any forward progress.  To me, discussions of whether there is going to be a double dip recession is misguided, whether we stay at excruciatingly low growth or actually see negative growth is beside the point.  In either case we remain at unacceptably high levels of unemployment and have a significant number of long term unemployed whose unemployment insurance is running out.  Which is why Congress' infatuation with debt and spending in the midst of a historic recession is very very frustrating to me.

But not to be too dismal, there are some very good aspects of the report.  First, it is a huge improvement over the June report which, even at the revised number of 46,000 was simply terrible.  Second, this comes at a time of massive cutbacks in most states so the number is net of all of the public sector job losses which means that the private sector is adding jobs at a reasonably healthy pace.  

For a nice illustration I turn to the New York Times' David Leonhardt who has a couple of nice graphs:

First the decline in government employment:

Next the increase in private sector jobs:

Annual private-sector job growth (blue) vs. population growth (red).
And no, I don't think this has anything to do with crowding out.

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