Employers Hire 100,000 Fewer Jobs Than Expected

This is from the Associated Press:

Job growth slowed nearly to a crawl in May, with new hiring registering the smallest gain in almost two years. The unemployment rate dipped to a low 5.1 percent, however.

The latest employment snapshot, released by the Labor Department on Friday, kept up the recent pattern of choppy job creation. Employers boosted payrolls by just 78,000 after a hiring spurt of 274,000 in April.

This is an interesting contradiction where job creation has been anemic while the unemployment rate has been dropping. However, both statistics are related in showing the weak labor market. Employers boost and cut payrolls according to their profitability and of the supply and demand of the market. Economists were forecasting a gain of 175,000 jobs for May. Unemployment, however, is the interesting statistic. The unemployment rate is a calculated percentage of how many individuals are collecting unemployment benefits by the total labor force. If an individual has used up his unemployment benefits, or gives up looking for a job, or becomes underemployed in a lower-skilled or part-time job, then that individual is also dropped from the unemployment rolls. So in effect, the Labor Department’s report still shows a poor job market.

Of course, this report offers crass politics for both the Democrats and Republicans. The Democrats will cite the weak job creation and wage growth as stagnation. The AP report states that worker’s average hourly earnings rose to $16.03 in May—which is 2.6 percent higher than the same month last year, however it is not keeping up with the pace of inflation. The Republicans will take credit in the dropping unemployment rate, saying that the economy is getting stronger, and the Bush Administrations economic policies are working.

This jobs report, by itself, cannot account for an improving economy, or an economy in recession. It is simply one of many contradictory statistics, which have puzzled economists over the recession and expansion of the last 5 years. The United States is in a vast structural change of its economy as globalization continues throughout the world, with rising industrialization occurring in China and Third World nations. Both the Republicans and Democrats have got to recognize that this structural change is going on, and produce innovative policies to help the U.S. workers adapt to these changes--and I'm not talking about the tired ideas of cutting business and payroll taxes that Republicans like, or to increase unemployment benefits that Democrats like. Unfortunately, with the hatred and rancor that both parties have to each other, this will never occur. What will happen to the U.S. as a result of this change is still a mystery.