The uncertainty surrounding a U.S. default may be gone, but the nation's economy is growing increasingly shaky. Today comes more reason for trepidation, with figures from two private sources showing stalled job growth and an uptick in layoffs. In the last week alone, the country has posted disappointing figures in GDP, personal income, and manufacturing, not to mention resultant stock market declines. All this adds to worries that the recovery might be grinding to a halt.
Today, payroll processing firm ADP estimated U.S. private-sector job growth of 114,000 from June to July. The figure is further evidence of a slowdown in the country's economic recovery. From December 2010 through April 2011, ADP estimates of private-sector job growth averaged over 200,000 per month. Adding to the grim picture is a report from outplacement firm Challenger, Gray & Christmas showing a "sudden and unexpected burst in private-sector downsizing" in July, with over 66,000 announced job cuts—a 16-month high and a 60 percent increase from June.
Altogether, the figures do not bode well for Friday's official jobs report from the Department of Labor. Losses in the public sector, which shed 48,000 jobs in May and 39,000 in June, could greatly diminish private-sector gains. Adding to the public sector's job woes is an ongoing Federal Aviation Administration funding dispute that has left that agency partially shut down. As Congress has gone on its August recess without resolving the dispute, the 4,000 furloughed employees and more than 200 halted construction projects may have to wait until September. In addition, the nation needs around 125,000 jobs per month just to keep up with population growth. If public-sector employment continues to drop and ADP's estimate is even relatively close to the government's estimate, job growth likely won't reduce the July unemployment rate from its current 9.2 percent. Of course, ADP's figures are by no means a perfect predictor of the Labor Department's jobs count. The firm's first estimate of May-to-June jobs growth, 157,000, well overshot the government's count of 18,000. ADP today also revised that June figure down to 145,000.
"What may be most worrisome about the July surge is that the heaviest layoffs occurred in industries that, until now, have enjoyed relatively low job-cut levels, including pharmaceuticals, computer, and retail," said Challenger, Gray & Christmas CEO John Challenger.
While bright spots on the employment scene seem nonexistent, there are a few reasons to hope for better days ahead. The most recent jobless claims report shows that, for the week ending July 23, total unemployment insurance claims dropped below 400,000, a level that many economists see as an indicator of real progress in job growth. Likewise, the drag created by the spring's high gas prices and Japan's March earthquake and nuclear plant disaster are wearing off.
With the debt ceiling fight over (for now), the White House and Congress say they are ready to turn their attention back to the employment crisis. Democratic and Republican congressional leaders alike have declared jobs to be Priority One on their agenda going forward. And in a Washington Post op-ed published yesterday, Treasury Secretary Timothy Geithner exhorted Congress to immediately turn to jobs after the August recess. "Lawmakers should return in September prepared to act to strengthen the economy and get more Americans back to work," he wrote, suggesting an extension of both the payroll tax cut and unemployment benefits as growth-stimulating tactics.
Kenneth Rogoff, a Harvard University professor of public policy, believes that such programs may be misguided. Instead of fiscal policy moves, Rogoff says action by the Federal Reserve has the power to boost the nation's economic fortunes. "I don't think the fiscal expansion was ever what stabilized the economy. I think it was monetary policy, TARP, and stabilizing the financial system," he says. Rogoff recommends further quantitative easing—that is, Federal Reserve purchases of bank assets, like treasury securities, in order to boost the money supply—as a more effective way to tackle the nation's weak economic growth. Federal Reserve Chairman Ben Bernanke has indicated that a third round of easing could be a possibility.