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By Jeremy Glaser | 07-02-2010 10:00 AM

Employment at a Stalemate

Morningstar's Bob Johnson and Vishnu Lekraj give their takes on June's employment report and offer predications for the coming months.

Jeremy Glaser: Employment at a stalemate. I'm Jeremy Glaser with Morningstar.com. Today's unemployment report was roughly in line with consensus estimates. Not a lot of surprises, but I'm here today with Associate Director of Economic Analysis, Bob Johnson, and employment analyst, Vishnu Lekraj, to take a look at their take on the report.

Gentlemen, thanks for joining me.

Bob Johnson: Thank you.

Vishnu Lekraj: Good to be here.

Glaser: So, we saw that there were 125,000 jobs lost. A lot of that was the 225,000 census workers that were laid off. What was your general take on the report?

Johnson: Well, I'd looked at it as the private sector is the key way to look at it. Let's put the census people aside and look at what the regular economy private sector is doing, and we grew about 83,000 jobs. It's a little less than I had hoped, I hoped we might get over 100,000, but it was a better growth than the previous month and we added about 33,000. So it accelerated a little bit. It's kind of in the realm of statistical noise. It's a pretty small increase.

Lekraj: Numbers were in line with what I had or what I thought would happen. Bob was right. Private sector grew a little bit, a lot more than last month, but we're at the point, like you said, a stalemate, where hirings and firings are pretty much equaling each other out. We're at zero. This report itself, in particular, wasn't a lot of positive in. It wasn't a huge amount of negatives, but there were more negatives than positives, I would say.

Glaser: One of the things that was somewhat surprising was that the unemployment rate, which comes from a different survey than the payroll numbers, fell to 9.5%, which was much – people actually expected to rise a little bit. What do you think was behind that fall?

Johnson: Well, I think the unemployment rate, as you say, is calculated by talking to individual households and doing a survey, and apparently a lot of people weren't looking for jobs, and people were little bit discouraged about the job outlook perhaps, and didn't even bother to look for a job, and then they are not counted as unemployed, unless you're actually going out and looked for a job. So, while the rate went down, which is nice to see, unfortunately it was because a lot of people left the workforce. They really weren't looking for a job.

Lekraj: Along those lines, when you look at the U3 number, the headline number, that went down, but when you take in consideration the U6 number, I know Bob doesn't really care for this number a lot. But it is out there, it is measured and the gap between the U3 and the U6 has increased to 7%, that hasn't come down for the past year. We'd like to see that range narrow into about 3.5%, which is normally what it should be.

Johnson: And the U6, just as a reminder of what is that, Vishnu?

Lekraj: That is workers looking for part-time or looking for full-time work, but they are working more part-time. They are encompassed in that unemployment rate also.

Glaser: Vishnu, were there any sectors that looked particularly strong or particularly weak this month?

Lekraj: It was a mixed bag. When you look at the construction sector, they continued to lose jobs, about 20-some thousand. Positively, that has slowed over the past few months.

When you take a look at leisure, that was a huge upside surprise in my opinion. When I spoke to our analyst in the floor, Warren Miller, who covers that sector, he explained to me that a lot of these companies that do participate within leisure and hospitality have bookings numbers that can go far out in months and years, and it looks like their bookings are pretty strong. So they've hired a lot. And temporary help again was a big, big gainer this month. Again, that's going to benefit our temporary service list, but things have started to slow a little bit overall with job gains.

Johnson: Yes, manufacturing had been a big gainer and it was a little bit of a smaller gainer this month. I think some of the momentum in the auto industry has slowed just a little bit, and that's kind of impacted the numbers. The finance has been one that's been incredibly – usually we come out of a recession, it starts to get better, it's been bad most of the recent months and has continued the same trend. We actually lost financed jobs again. And the information services, kind of publishing type, communications type jobs were another area that was a little bit disappointing this month. So, as you said, kind of a mixed bag.

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