Contrary to the expectation of pundits and economists, May’s employment numbers released by the U.S. Labor Department are an unmitigated disaster. At first glance, though, the uninformed would think that the vast deficit funding on economic stimulus by the Obama administration was working. Supposedly, “employers” added 431,000 jobs, and the overall U3 unemployment rate dropped to 9.7%. However, the so-called “employers” consisted almost entirely of the U.S. federal government, which added 411,000 temporary census jobs in May. These jobs, which will disappear in a few weeks, are responsible for about 95% of the claimed job creation in May in the United States.
In May, according to the government’s own data, private sector job creation was statistically insignificant. I personally believe, based on past patterns, that the U.S. government statisticians consistently over-report private sector employment in most of the initial monthly tabulations.
One other factor should be noted. The drop in unemployment from 9.9% to 9.7% was due not to vast job growth in the U.S. economy, but rather due to the fact that 322,000 unemployed workers were eliminated from the officially counted workforce. In fact, when one counts this category of so-called discourage workers, in addition to part time workers unable to find preferred full-time employment, the more inclusive U6 unemployment rate is close to 20%, or one in every five U.S. workers.
With continuing high rates of unemployment, it is clear that there will be no consumer-led economic recovery in major advanced economies. This means that massive government deficit spending is the only means of propping up national economies. However, with the global economic crisis rapidly mutating into a virulent sovereign debt crisis, the option of public pump-priming clearly has its days numbered.