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.

09.09.09

Economic Trends

Employment Situation, August 2009

Beth Mowry

Payroll losses continued to moderate in August, as net nonfarm employment declined by 216,000 compared to an average loss of 405,000 jobs over the past six months. However, revisions tacked an extra 49,000 losses onto June and July figures, leaving those months’ respective declines at 463,000 and 276,000. The added declines were almost entirely due to downward revisions to government payrolls.

The unemployment rate climbed 0.3 percentage point to 9.7 percent in August as the number of unemployed persons jumped up 466,000. July’s slight unemployment rate decline of 0.1 percentage point was caused by 422,000 people exiting the labor force. A less volatile measure of labor market stress is the employment-to-population ratio, which reached its lowest level since 1984, 59.2 percent. Although the labor market has come a long way since 741,000 payrolls were cut in January, the August cuts were still large by historical standards.

The diffusion index of employment change rose to 35.2, a substantial improvement from March’s record low of 19.6, but still far below the expansionary threshold of 50. The current reading means that only 35.2 percent of industries are expanding employment, while the rest are still announcing layoffs or holding tight.

The moderation in payroll decline last month applied to most major industries, although goods-producing industries as a whole worsened, dropping from 122,000 losses in July to 136,000 losses in August. Within goods industries, manufacturing losses picked up to 63,000, while construction losses lessened to 65,000. While manufacturing losses grew in August, they were still much better than average losses of about 170,000 jobs over the first two quarters of the year. Furthermore, manufacturing payrolls in September are likely to continue improving as auto manufacturers resume production in the aftermath of the cash-for-clunkers program.

Payroll losses in service-providing industries lessened considerably, from 154,000 in July to just 80,000 in August. The only industries not contributing to the overall improvement in services were financial activities, in which losses nearly doubled to 28,000, and leisure and hospitality, in which a 1,000 payroll gain in July turned to a 21,000 loss in August. All other service industries moved closer to positive territory. Trade, transportation and utilities shed just 28,000 jobs last month compared to 85,000 in July, professional and business services lost 22,000 jobs compared to 33,000 in July, information services decreased its losses from 14,000 to 10,000, and the government shed 18,000 jobs compared to 28,000 in July. Retail trade losses shrank from 43,000 to just 9,600, marking this sector’s best performance since January 2008. Although government losses were smaller in August, the sector has declined for four consecutive months now after solidly contributing to labor market growth throughout most of the earlier months in this recession. Education and health was the lone sector to outright add jobs, increasing its payroll count by 52,000 compared to 21,000 in July.

Labor Market Conditions and Revisions

 
Average monthly change (Thousands of employees, NAICS)

June
current

Revision to June

July
current

Revision to July

August
2009
Payroll Employment
−463
−20
−276
−29
−216
Goods-producing
−212
11
−122
6
−136
Construction
−79
7
−73
3
−65
Heavy and civil engineering
−14
2
−8
2
−8
Residentiala
−24.8
8
−23
3
−23
Nonresidentialb
−40.2
−3
−41
−3
−35
Manufacturing
−123
8
−43
9
−63
Durable goods
−101
4
−24
8
−51
Nondurable goods
−22
4
−19
1
−12
Service-providing
−251
−31
−154
−35
−80
Retail trade
−20
1
−43
1
−10
Financial activitiesc
−33
−4
−17
−4
−28
PBSd
−101
5
−33
5
−22
Temporary help services
−30
2
−8
2
−7
Education and health services
33
−4
21
4
52
Leisure and hospitality
−19
−1
1
−8
−21
Government
−72
−24
−28
−35
−18
Local educational services
−8
−16
−31
−14
−9
  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.