Meet the Author

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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Meet the Author

Beth Mowry |

Research Assistant

Beth Mowry

Beth Mowry was formerly a research assistant in the Research Department of the Federal Reserve Bank of Cleveland. Her work focuses on labor markets and business cycles.

06.05.09

Economic Trends

The Employment Situation, May 2009

Beth Mowry and Murat Tasci

Employment losses moderated in May, as nonfarm payrolls dropped by 345,000, much less than the average loss of 643,000 of the prior six months. This was the smallest payroll decline since September 2008, and revisions to March and April lessened those months’ losses by a total of 82,000.The moderation was driven by fewer losses in construction; trade, transportation, and utilities; and professional and business services, as well as larger gains in education and health.

The unemployment rate, however, continued its rapid ascent, climbing 0.5 percentage point to 9.4 percent, its highest since 1983. Although May’s job losses were far lower than expected, the additional 345,000 brings total losses this recession to 6.2 million.

The Diffusion Index of Employment Change, which tracks the percentage of industries with increasing employment, made its largest jump since September 2007 and now sits at 32.7. However, it still implies that only 32.7 percent of industries are expanding employment, and the rest are laying off or holding their own.

Goods-producing payrolls dropped by a more moderate 225,000 in May, owing entirely to smaller losses in construction. The construction industry shed just 59,000 jobs, a much smaller number than the 108,000 of the month before. The improvement applied to both residential and nonresidential construction. Manufacturing losses stayed roughly the same at 156,000.

Job losses in service-providing industries were cut in half last month to 120,000. Industries responsible for this improvement were trade, transportation, and utilities; professional and business services; education and health; and leisure and hospitality. Trade, transportation, and utilities lost only 54,000 jobs in May compared to April’s loss of 115,000. Retail trade losses were halved (17,500) in the sector’s best month since June 2008. Professional and business services dropped 51,000 payrolls compared to the previous month’s 111,000, and leisure and hospitality had its first positive report since the beginning of the recession, contributing 3,000 jobs.

Education and health, the only industry that has not experienced a net job loss this recession, had its best month since November, adding 44,000 jobs. Losses in financial activities lessened to 30,000 over the month, but losses in information increased slightly to 24,000. The government sector, which typically makes positive contributions to the employment picture, actually lost 7,000 jobs last month compared to a large 92,000 gain in April.

Labor Market Conditions and Revisions

  Average monthly change (Thousands of employees, NAICS)

2006

2007

2008

YTD 2009

May 2009
Payroll employment
178
96
−257
−585
−345
Goods-producing
5
−34
−126
−302
−225
Construction
15
−16
−57
−108
−59
Heavy and civil engineering
3
0
−6
−11
−8.7
Residentiala
−5
−23
−35
−45
−19.5
Nonresidentialb
16
6
−16
−52
−31.7
Manufacturing
−14
−22
−73
−183
−156
Durable goods
−4
−16
−54
−146
−131
Nondurable goods
−10
−5
−19
−37
−25
Service-providing
173
130
−131
−282
−120
Retail trade
3
14
−44
−44
−17.5
Financial activitiesc
9
−10
−19
−46
−30
PBSd
45
25
−63
−122
−51
Temporary help services
2
−7
−44
−56
−6.5
Education and health services
39
43
43
27
44
Leisure and hospitality
33
21
−21
−127
3
Government
17
24
14
19
−7
Local educational services
6
8
1
5
2
  Average for period (percent)
Civilian unemployment rate
4.6
4.6
5.8
8.5
9.4

a. Includes construction of residential buildings and residential specialty trade contractors.
b. Includes construction of nonresidential buildings and nonresidential specialty trade contractors.
c. Financial activities include the finance, insurance, and real estate sector and the rental and leasing sector.
d. PBS is professional business services (professional, scientific, and technical services, management of companies and enterprises, administrative and support, and waste management and remediation services.
Source: Bureau of Labor Statistics.

Despite the many brighter spots in this report, the unemployment rate shot up by a more-than-expected 0.5 percentage point all the way to 9.4 percent. The number of unemployed workers rose by 787,000, and the employment-to-population ratio, which had held steady at 59.9 percent in April, slipped 0.2 percentage point to 59.7 percent. Both the unemployment rate and the employment-to-population ratio are at levels not seen since the mid-1980s.