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Murat Tasci |

Research Economist

Murat Tasci

Murat Tasci is a research economist in the Research Department of the Federal Reserve Bank of Cleveland. He is primarily interested in macroeconomics and labor economics. His current work focuses on business cycles and labor markets, labor market policies, and search frictions.

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08.10.09

Economic Trends

The Employment Situation, July 2009

Murat Tasci and Alex Bluebond

The decline in nonfarm payroll employment slowed to 247,000 in July, beating expectations of a 320,000 decline. Upward revisions to May and June added 43,000 jobs, bringing estimated payroll changes in those months to −303,000 and −443,000, respectively. The unemployment rate unexpectedly ticked down by 0.1 percentage point to 9.4 percent in July (marking the first decrease since April 2008). However, that number may be misrepresenting true labor market slack, as 442,000 people exited the workforce, which might account nearly twice the decrease in the number of unemployed (267,000). The employment-to-population ratio was relatively stable in July, ticking down just 0.1 percentage point to 59.4 percent.



The diffusion index of employment change currently sits at 30.1, meaning only 30.1 percent of industries are increasing employment. While this is an improvement over recent months, it still sits well below the threshold of 50, which indicates an equal balance of industries expanding and contracting employment.

Payroll losses were still broadly spread across the major industries in July, although mostly at slower rates. Losses in goods-producing industries slowed to 128,000 from 223,000 in June. Within goods industries, construction employment declined by 76,000, compared to 86,000 last month. Manufacturing witnessed a large improvement, losing 52,000 jobs in July compared to 131,000 in June. This improvement occurred mostly within durable goods, as losses there fell to 32,000 from 105,000.

Service Industries saw losses fall from 220,000 in June to 119,000 in July. Education and health services, leisure and hospitality, and government all actually saw job growth in July. Government, in particular, added 7,000 jobs after losing 48,000 in June. On the other hand, while education and health services added jobs, fewer were added in July (17,000) than in June (37,000). Other industries lost fewer jobs than in previous months. Professional and business service payrolls slipped just 38,000 in July, much less than the average of −118,000 over the past six months. Retail trade was the one sector where no improvement occurred, as payrolls declined 44,000 in July, more than double the decline of 21,000 the month before.

Revisions to previous estimates indicated that service-providing industries did not lose nearly as many jobs in May and June as previously thought. A total of 40,000 jobs were added in service industries over those two months. Most of the upward revision was seen in professional business services, which added 21,000 jobs in May and 12,000 in June to previous estimates. Not all revisions were positive, however. Retail trade took another hit as the revision subtracted an additional 11,000 jobs from May’s estimate.

Labor Market Conditions and Revisions

  Average monthly change (Thousands of employees, NAICS)

May
current

Revision to May

June
current

Revision to June

July
2009
Payroll employment
−303
19
−443
24
−247
Goods-producing
−221
3
−223
0
−128
Construction
−57
−9
−86
−7
−76
Heavy and civil engineering
−9.4
−1
−16
0
−10
Residentiala
−13.5
−2
−33
−2
−27
Nonresidentialb
−33.5
−6
−38
−5
−39
Manufacturing
−146
10
−131
5
−52
Durable goods
−130
10
−105
7
−32
Nondurable goods
−28
0
−26
−2
−20
Service-providing
−91
16
−220
24
−119
Retail trade
−28
−11
−21
0
−44
Financial activitiesc
−27
3
−29
−2
−13
PBSd
−27
21
−106
12
−38
Temporary help services
−1
7
−31
6
−10
Education and health services
40
−7
37
3
17
Leisure and hospitality
27
9
−18
10
9
Government
−11
−1
−48
4
7
Local educational services
−3
−2
8
5
−17
  1. Includes construction of residential buildings and residential specialty trade contractors.
  2. Includes construction of nonresidential buildings and nonresidential specialty trade contractors.
  3. Financial activities include the finance, insurance, and real estate sector and the rental and leasing sector.
  4. PBS is professional business services (professional, scientific, and technical services, management of companies and enterprises, administrative and support, and waste management and remediation services.
  5. Source: Bureau of Labor Statistics.