The Bureau of Labor Statistics (BLS) reported today that
country's unemployment rate increased to 9.5 percent in June and
employers shed 467,000 jobs. While the unemployment rate showed
only a slight increase, the number of lost jobs was higher than in
While this report is not as bad as some of the previous job
reports, the employment situation remains grim. Indeed, it
underscores how cautious economic analysts need to be in predicting
the imminent end of this recession. This month's report also
further mutes claims by President Barack Obama and economists in
his Administration that his economic stimulus legislation passed
last February has created and saved hundreds of thousands of
The June Report
The unemployment rate increased a tenth of a percentage point,
which was lower than expected. However, part of this increase was
due to the fact that many people left the labor force last month.
This is probably due to data noise, because May saw a spike in the
number of people entering the labor force, which led to a large
jump in the unemployment rate.
One positive sign was that BLS revised employment in April and
May upwards by 40,000. The rate of decline of employment has also
slowed. The first quarter saw an average monthly employment decline
of 691,000, but the second quarter decline has only averaged net
436,000 job losses.
While it is good news that the rate of employment loss has
declined, monthly job gains are still far away. Average weekly
hours continued to decline, which means that not only are employers
shedding employment, but they are also reducing the job hours of
those still currently employed.
The minimum wage also increases this month, which will put
further pressure on employers to either reduce jobs or hours. Over
the last calendar quarter, wages have been flat or have fallen, and
this artificial wage increase will hurt employment opportunities.
Teenagers, who already have the largest unemployment rate at 24
percent, will be particularly vulnerable. At the least, Congress
should delay this minimum wage increase until the economy has
Job losses remain heavy and widespread throughout the various
industrial sectors. Construction (-79,000) and manufacturing
(-136,000) continue their streak of sharp employment declines. A
small glimmer of good news for manufacturing is that the hours of
work increased slightly and has remained steady for the last
The service sector shed 244,000 jobs, with retail (-21,000)
suffering the least. Professional and business services (-118,000)
was hard hit. Architects (-13,500) lost many jobs, with few
construction planning projects on the horizon. Overall, 5 percent
of all architect jobs have been lost in 2009 alone. Another
hard-hit sector is in temporary employment (-37,600), which has
lost one-third of its jobs since the start of the recession in
Education and health (34,000) continues to be one of the few
sectors adding jobs. Health services (20,000) account for the
majority of these new jobs, as an aging U.S. population needs more
medical care and personal assistance.
Stimulus's Promised Benefits
To combat this recession, President Obama pressed for an $800
billion economic "stimulus" package largely consisting of increased
federal spending on traditional liberal priorities. The President
argued that this stimulus would "create or save" 3.5 million jobs.
The President's economic advisors predicted that unemployment would
rise to 9 percent by 2010 if Congress did not pass the stimulus
bill but that with the stimulus unemployment would stay below 8
Congress passed the stimulus bill in February 2009, and the
President has repeated his claim that it is creating and saving
jobs. President Obama recently claimed that the stimulus bill has
already created or saved 150,000 new jobs and that it will "create
or save" another 600,000 jobs by the end of the summer. Asked
when the public should begin to judge the effects of the stimulus,
White House Press Secretary Robert Gibbs said, "I think we should
begin to judge it now."
Stimulus's Benefits Invisible
However, if the stimulus has helped the economy, its benefits
have not appeared in any economic report. Not only has unemployment
risen above what the President's advisors predicted would happen if
the stimulus passed, but it has risen above what they estimated
would occur without the stimulus. Figure 1 shows the
Administration's projections at the start of the year of
unemployment with and without the stimulus bill and the actual
unemployment rate. By the President's own measure, the stimulus has
It is impossible to directly measure the how well the stimulus
has fulfilled the President's promise to "save" jobs because no
government agency measures "jobs saved." However, the BLS does
measure a related figure: job loss rates. If the stimulus bill has
prevented jobs from being lost, the monthly job loss rate would be
expected to decline. If the job loss rate has stayed the same or
increased, then the President cannot credibly claim that the
stimulus saved jobs.
Job Loss Rates Have Not Fallen
Two different surveys measure job loss rates: the Current
Population Survey (CPS) and the Job Openings and Labor Turnover
Survey (JOLTS). The CPS is the survey used to calculate the
unemployment rate and reveals the proportion of employed workers
who lose their jobs and become unemployed each month. The
JOLTS directly measures job turnover, and JOLTS data reports the
proportion of workers who involuntarily leave their jobs each
month. Figure 2 below reports both job loss
Both measures show that job loss rates increased sharply since
the start of the recession and that they have not fallen since
President Obama signed the stimulus bill.
The JOLTS reports that in February, 2.2 percent of workers
involuntarily left their jobs. By April 2009 (the most recent data
available), that figure rose to 2.3 percent. The CPS reports that
1.9 percent of workers employed in January 2009 lost their jobs in
February--a figure that remains unchanged in May.
Despite the decline in net job losses, employed workers are just
as likely to lose their jobs today as before the stimulus became
law. The stimulus has not measurably affected job loss rates.
Nothing in the data shows that the billions of dollars spent on the
stimulus has--in the aggregate--saved jobs that would have
otherwise been lost.
The White House says that the American public should begin to
judge the effects of the stimulus now. In that case, the stimulus
has so far failed.
While the economic report is less grim than at the start of the
year, the economy continues to weaken, and signs of a recovery
remain distant. Unemployment has hit a 26-year high of 9.5 percent,
and another 467,000 net jobs disappeared in June. Unemployment has
risen well above the level the White House predicted would occur
without the stimulus, and job loss rates have not fallen. The
benefits promised by the stimulus remain unfulfilled. Congress
should flatly reject any calls for a second stimulus bill and delay
implementation of the scheduled minimum wage increase to prevent
further job erosion.
Hederman, Jr., is a senior policy analyst and the assistant
director at The Heritage Foundation's Center for Data Analysis. James Sherk
is the Bradley Fellow in Labor Policy at The Heritage