The latest monthly job report from the Department of Labor comes out Friday. Given the heavy Census hiring, the report will probably be best we've seen in more than 10 years, maybe more than 20, recording as many 600,000 new jobs created. You have to go back to the Clinton administration to see a month even close to that. For comparison, last year at this time we clocked a loss of 387,000 jobs on top of even worse losses in the preceding eight months.
Unless a huge number of "missing workers" returned to the labor force in May, we'll also probably see a tenth of a point or two drop in the unemployment rate. So, Vice President Joe Biden will be right for at least one month.
But May's monthly numbers most likely will be the best job news for all of 2010 and 2011.
Why?
For one thing, some 400,000 of those new jobs we'll hear about Friday will be temporary Census jobs. Not to be sneezed at, of course. Welcome jobs to those who've got them. But this month, those same jobs will start going away. In May 2000, for instance, 348,000 people were hired for the Census. In June 2000, 225,000 of those jobs ended. By summer's end, almost all this year's Census hires will be looking for new employment. So when the job numbers come out on Friday, the ones to really look at will be how many people got hired by the private sector. It will not be surprising if those amount to 200,000 or more, a continuation of the trend that began picking up steam in February.
But the real test comes when the job-creation numbers for June and those that follow in the third quarter are released. We'll certainly see positive figures each month until year's end and beyond. But short of some miracle that persuades Congress to begin a new Works Progress Administration (or a Civilian Cleanup Corps for the Gulf of Mexico), we'll be totally dependent from here forward on private-sector hiring to put millions of out-of-work people back on the payroll. And, the general outlook – with some exceptions – is that this simply won't be enough to improve the situation in the next two years for the majority who have lost jobs.
Among the factors driving the situation are that the effects of the stimulus package passed 16 months ago will fade in the third and fourth quarters. Strapped state budgets from Oregon (a projected shortfall of $577 million) to New York (a projected shortfall of $9.2 billion) mean large numbers of layoffs of public employees, including teachers. Elizabeth McNichol and Nicholas Johnson at the Center on Budget and Policy Priorities, in Washington, D.C., noted last week that:
The worst recession since the 1930s has caused the steepest decline in state tax receipts on record. As a result, even after making very deep spending cuts over the last two years, states continue to face large budget gaps. At least 46 states face or have faced shortfalls for the upcoming fiscal year (FY 2011, which will begin July 1 in most states). These come on top of the large shortfalls that 48 states faced in their current budgets (FY 2010). States will continue to struggle to find the revenue needed to support critical public services for a number of years, threatening hundreds of thousands of jobs.
The center’s Jon Shure puts a hard number on that, saying the overall effect may be about 900,000 jobs, "which is not a recipe for economic recovery — or for long-term improvement in the national deficit."
Newsweek reports:
Economists from the left-leaning Economic Policy Institute (EPI), the centrist Brookings Institution, and the conservative Heritage Foundation may not all agree on much, but they agree on this: unemployment, which currently hovers around 10 percent, is not coming down significantly between now and November's midterm elections.
"I'm not aware of labor-market economists who expect unemployment to drop significantly before the midterms," says James Sherk of the Heritage Foundation. "The average for the last generation has been around 5.5 percent or so, and it won't be anywhere near that."
"My best guess is unemployment will be in November exactly what it is now," concurs Josh Bivens of EPI, adding that the nonpartisan Congressional Budget Office projects a yearlong average of 9.5 percent in 2011, and Goldman Sachs predicts higher unemployment in 2011 than in 2010.
As I said at the outset, that's not how everybody sees things. The Fed, for instance predicts a drop in the unemployment rate to 9.3 percent by the end of this year and 8.2 percent by the end of 2011. To get there, however, would require creating an average of 385,000 new jobs each month for the next seven months, and 323,000 for the 12 months after that, a total of 6.9 million jobs. When was the last time this was done in the past 50 years? Never.