Advertisement
business

Employers Get the Jitters

Private firms will pick up hiring again in June.

If job growth in May was disappointing, June’s performance, at first glance, is likely to be worse. As the national Census winds down and those temporary government jobs start to disappear, odds are total U.S. payroll figures will once again decline.

But on closer inspection, the underlying trend of modest gains will remain intact. Payrolls soared by a whopping 431,000 positions in May -- at first blush, not disappointing at all. In fact, that’s the best monthly showing since a 472,000 surge in March of 2000. But both in March 2000 and in May 2010, hiring was hugely inflated by the temporary hiring of Census workers. Last month, Census workers accounted for 411,000 jobs created, leaving just 20,000 jobs created by the rest of the economy. That’s about one-sixth the pace averaged over the previous three months (136,000 jobs a month) and down sharply from the 223,000 non-Census jobs gained in April.

Advertisement - Article continues below

The cause of the May slowdown in private company hiring seems clear: heightened anxieties around the financial crisis in Europe and weird stock market gyrations. In this case, timing exaggerated the impact. The government conducts its jobs tally on the week of the month containing the 12th day. Last month, that extended from May 9th to the 15th, just days after the bone jarring May 6th “flash crash,” when the Dow Jones Industrial Average posted its worst intraday decline ever -- nearly 1,000 points. That same week, investors were dumping Greek bonds en masse, with other European governments also experiencing capital flight. On Monday, the 9th, the International Monetary Fund and the European Union announced a giant bailout, with the European Central Bank and the Federal Reserve each playing supporting roles. In a nutshell, it was a pretty hairy time and not exactly an environment conducive to risk taking, which includes hiring workers.

Advertisement
Advertisement - Article continues below
Advertisement - Article continues below

Details of the May employment report corroborate the angst felt by employers. The hiring of temporary workers, for example, had diminished over each of the previous five months, as employers increasingly gained the confidence to add permanent positions to payrolls. But temporary hiring rose again in May, implying that, although workers were needed, employers were playing it safe and holding off on long-term commitments. In May, workers also put in more hours, including overtime, reflecting the same desire by employers to get more done without taking the risk of overstaffing. Financial jitters may have also discouraged job seekers: the labor force actually shrank in May, helping to drive the jobless rate to 9.7% from 9.9% in April.

No doubt, the European financial crisis and resulting fiscal consolidation will mean slower economic growth there, curbing demand for U.S. exports and dampening gains here. But the orchestrated bailout seems to be working and is likely to stanch the contagion fears that were so intense just one month ago. Moreover, although signs of improvement are absent, financial measures of risk aversion -- corporate bond spreads, equity prices, interest rates on short-term lending between banks -- all evened out in the early days of June, after increasing in May.

As concern about the worst-case outcome of the European crisis fades, private hiring will again pick up. In June, it won’t be enough to offset a big drop in Census jobs, but it will make clear that jobs are slowly being recovered and the economy is on the mend.

Advertisement

Most Popular

What Are the Income Tax Brackets for 2020 vs. 2019?
tax brackets

What Are the Income Tax Brackets for 2020 vs. 2019?

The IRS unveiled the 2020 tax brackets, and it's never too early to start planning to minimize your future tax bill.
June 20, 2020
Tax Changes and Key Amounts for the 2020 Tax Year
tax law

Tax Changes and Key Amounts for the 2020 Tax Year

Americans are facing a long list of tax changes for the 2020 tax year...and it's never too early to start thinking about next year's return.
June 22, 2020
10 Tax Breaks for the Middle Class
tax deductions

10 Tax Breaks for the Middle Class

Tax breaks aren't just for the rich. There are plenty of them that are only available to middle- and low-income Americans.
June 30, 2020

Recommended

Nursing in the Time of COVID-19
Financial Planning

Nursing in the Time of COVID-19

This health care professional warns that the pandemic will worsen the nursing shortage.
July 2, 2020
Chiropractor Trying to Get Business the Wrong Way – Illegally
careers

Chiropractor Trying to Get Business the Wrong Way – Illegally

A new chiropractor’s fledgling business plan to attract patients may sound reasonable at first look, but it’s actually against the law, and the same p…
June 30, 2020
Post-COVID-19, Seniors Must Chart a New Path in the Workplace
retirement

Post-COVID-19, Seniors Must Chart a New Path in the Workplace

Those most vulnerable to the pandemic will face challenges in the return to work, even as the recession means they may need their paychecks more than …
June 11, 2020
Dealing with an Early, Unexpected Retirement
retirement

Dealing with an Early, Unexpected Retirement

Current economic and health crises may be pushing many toward an unexpected retirement. Now is a good time to make a plan for yourself, just in case.
June 9, 2020