Private sector job growth fails to check rising unemployment rate

The eighth straight month of private sector job growth couldn't offset public sector layoffs, population growth and people re-entering the work force. Image: Thinkstock

The U.S. unemployment rate crept upward in August to 9.6 percent from 9.5 percent in July. But even though the jobless rate rose, employers hired more workers than expected. The uptick in unemployment statistics is being credited to the end of temporary U.S. Census jobs, layoffs in state and local governments and an influx of people resuming their job searches. But private sector hiring increased for the eighth straight month. The Labor Department also revised figures for June and July that show more jobs were created and fewer were lost than originally estimated. The positive aspects of the latest jobs report are giving economists hope that the economy won’t relapse into a double-dip recession.

Unemployed workers overwhelm job creation

The U.S. unemployment rate rose for the first time in four months according to Friday’s August jobs report from the Labor Department. MSNBC reports that although private employers added 67,000 jobs, the U.S. unemployment rate is skewed by the loss of 114,000 census jobs and 10,000 job cuts in state and local governments. More than 500,000 people started trying to find jobs again to further push up the jobless rate–the first time the work force has grown since April. Revised job creation figures also improved the employment outlook. Private sector job growth for July was revised upward to 107,000 from 71,000. June job creation was revised upward to 61,000 from 31,000.

Huge crater in labor market hard to fill

The U.S. unemployment rate has been a persistent and vexing problem. However, CNNMoney reports that by historical standards, the labor market is recovering faster than it has during past recessions. But because so many jobs were lost, higher growth than normal is required replace them. In 2008-09, 8.4 million jobs were lost–about 7 percent of all jobs. Only 3.1 percent of all jobs were lost during the 2001 recession and the jobless recovery that followed. During the 1990-91 recession, only 1.9 percent of all jobs were lost. Sustained job growth returned six months after the current recession was declared over in June 2009. The turnaround took 12 months to begin after the 1990-91 recession. After the 2001 recession, job growth took 22 months to resume.

Economic expansion outpaced by population growth

Job creation has dropped steadily since employers were adding about 200,000 workers a month. CNNMoney said at that rate it would take more than three years to replace the jobs lost in 2008-09. The Christian Science Monitor reports that if the public and private sectors created 100,000 jobs per month, the unemployment rate will not go down. Population growth continuously adds to the labor force, and workers who had given up reconsider and re-enter the labor force. Hiring is slow at the current level of economic expansion because many companies have increased output by working employees harder. However, another Labor Department report showed productivity dropped in the second quarter. To sustain growth employers may have to start hiring.