When the Labor Department released its employment statistics for April, most media portrayed the loss of 20,000 jobs as a good thing -- because experts had expected the losses to be greater. At the time, I wrote in my blog, companies appeared to be scaling back employee hours and taking other cost-cutting measures rather than firing folks.
Unfortunately, that appears to be changing. According to the Labor Department's latest statistics, U.S. employers cut 49,000 jobs in May, bringing the nation's unemployment rate to 5.5 percent, up from 5 percent in April. It was the biggest monthly jump in jobless numbers since 1986, according to this NBC10.com report. The 5.5 percent jobless rate is the highest since 2004. A year ago, it was 4.5 percent.
It turns out the jobless numbers for both March and April turned out to be higher than the original government reports, notes the article. Employers have shrunk payrolls for the past five months.
In a minor bit of good news, average hourly earnings for jobholders rose to $17.94 in May, a 0.3 percent increase from the previous month and slightly ahead of economists' forecasts. Over the last 12 months, wages have grown by 3.5 percent.
I think this SeekingAlpha column by SitkaPacific Capital Management investment advisor Michael Shedlock does a nice job of reviewing four key contributors to job losses: globalization, a sinking U.S. dollar, misguided economic policies and America's waning influence in the world economy.
While Shedlock acknowledges that globalization has led to a loss of jobs, he says that U.S. employers like General Motors have little alternative to seeking lower-cost labor in other countries. As he notes, ... "if GM continues to pay (U.S.) workers what they have been paying them, GM will go bankrupt sooner rather than later."
Shedlock believes there is "purposeful debasement" of the U.S. dollar to increase exports. While a weak dollar should drive export business, it also results in some pretty serious unintended consequences: fewer jobs and higher prices on imported goods and fuel. Among the "misguided policies" Shedlock mentions are the government's promotion of ethanol as an oil alternative and America's apparent desire to serve as the world's policeman.
Perhaps the single biggest problem, however, says Shedlock, is a nation that has "tried to spend [its] way to prosperity," a misguided idea that has been encouraged by easy credit and a lack of national fiscal responsibility. He writes:
As I look ahead to 2008, though, I believe that each of us, the communities we live in, and the organizations and companies we serve, are going to have to make choices. We are going to have to separate what is most important from least, and act accordingly. Where life was once limitless, it will now be constrained. And, like it or not, all of us will need to return to our vocabulary a simple phrase that I believe has been lost over the past 20 years: "I can't afford that."