US jobs numbers suggest 'soft patch' may get stickier

Today's job numbers from the US are a reminder that the space programme isn't the only feature of postwar America that seems to have gone into reverse.

When Nasa was created, in 1958, around 85% of American working age men were in work. Today that figure is less than 64%.

And the percentage of all Americans, men and women, in work, is lower than it has been at any time since the early 1980s, when that first space shuttle was launched.

Today's shocking payroll figures for June won't help one bit.

When I was in Washington this week, most economists I spoke to were cautiously optimistic about today's release.

It turns out that only the caution was well-placed: the US labour market added only 18,000 new jobs last month.

That number is a "very large bucket of water" for the markets, even worse than the 25,000 increase in May, which everyone was hoping would be a blip.

Analysts had expected a number well over 100,000 today, to begin to put the jobs recovery back on course. Instead they got this.

To put these large sounding numbers in perspective, remember that the US labour force is growing a lot faster than ours.

It needs to create a lot of jobs each month just to stand still, let alone make a dent on the 9.2% unemployment rate (which rose again last month).

Here's the number to remember: from where it is now, the US would need to create at least 200,000 jobs a month, every month for 5 years, just to get unemployment back to its long-term average of 5%.

These latest figures do show that the private sector is taking on workers: private sector employment rose by 57,000 in June.

But that compares with a 240,000 average monthly rise between February and April.

If you're looking for grains of comfort, you could note that the seasonal adjustment was unusually high, even for June.

The adjusted total in June is always a lot lower than the unadjusted figure, to smooth out all those people taking summer jobs, but this year the the statisticians have adjusted away 1,084,000 jobs in the private sector, compared with 'only' 920,000 in June 2010.

According to Ian Shepherdson, of High Frequency Economics, if they had simply adjusted by the same amount as last June, private sector payrolls would have risen by 221,000, not 57,000.

It's not obvious why this year's adjustment should be so much more aggressive.

So, there's a chance that the figures are be wrong. But that may be most positive thing I can say about today's data.

At worst, they suggest that the "soft patch" for the US economy might be turning into something worse. At best, they show that the recovery is continuing to leave the American labour market behind.

(Published by BBC - July 8, 2011)