Digging into the weak jobs outlook
Atlanta Fed President Dennis Lockhart commented on national labor market conditions during his recent speech to the World Affairs Council of Jacksonville:
"In terms of job creation, we appear to be treading water. Basically, the weak pace of growth in output since the end of the recession has translated to only modest net job creation. Modest gains in the private sector have been partially offset by ongoing losses in the public sector."
In the states of the Sixth District, this weakness has certainly been evident. Over the last three measured months (June, July, and August), total net employment has declined 36,600, with government payrolls declining 37,500 and private sector job growth a paltry 900. Local government employment accounts for much of the total job losses with a decline of 25,600. State government employment fell 10,300 and federal government employment fell 1,600 in June through August. While the data are seasonally adjusted, I'm skeptical about the magnitude of the decline in local government employment, as it occurred when public sector K–12 schools were not in session.
But as the chart below shows, even if we discounted local government employment over the summer months, the real story here is the drop in private sector job growth. After posting gains from February through May, private sector job gains decelerated to just 4,000 in June, then declined a total of 3,100 in July and August.
To help us better understand these dynamics, we reached out to our business contacts throughout the region, and we heard several key messages. First, most agreed that there was indeed little hiring taking place across much of the District. Employers are clearly managing their labor supply very tightly.
A significant contributor to hiring restraint was an unclear outlook. Uncertainty was a notable impediment to hiring. While many contacts associated the cause of uncertainty with regulatory agencies and economic policymakers, it is clear from our conversations that the murky macroeconomic environment is also a major culprit. We should not downplay the negative influence of an uncertain economic policy environment on business planning, but we should also recognize that this aspect of uncertainty is only a part of the story.
Despite the uncertain forecast, our contacts were not overly pessimistic regarding the outlook, which is not to say that we detected much optimism, but the absence of panic or despair is a good sign.
By Mike Chriszt, an assistant vice president in the Atlanta Fed's research department
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