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Jobs report: Why there isn't more hiring

A man looks at employment notices on the wall at the New York State Department of Labor employment center in the Brooklyn borough of New York City.

TEXT OF STORY

Kai Ryssdal: The math goes a little something like this: 431,000 jobs were added to the economy last month. You take away almost all of 'em -- temps for the 2010 Census -- and what you have is a dispiriting 41,000 net new places to work for the month of May. We're going to take today's report apart with Marketplace's Mitchell Hartman. Hello, Mitchell.

Mitchell Hartman: Hello, Kai.

Ryssdal: So let's get straight to the jobs that count on this report, which would be the permanent, private-sector jobs, right?

Hartman: Right. I was getting these exciting e-mails predicting anything from 170,000 to nearly double that. And that's in addition to the census temps. Well, the census numbers were right. But all the other employers out there, they just sort of didn't show up to the party in May. I mean, the best number in there was 29,000 jobs added in manufacturing. Thirty-seven thousand were added in services, but actually most of those were temps.

Ryssdal: Yeah, which -- as we said -- doesn't really help. OK. So let me ask you this then: Does it mean job creation, which we've been enjoying for a couple of months, has stalled or has it just taken a break?

Hartman: Well, you have to look at a few months to really see a trend. March and April were actually a good deal better than May. So average it all out and employers are averaging, I don't know, maybe 130,000 private-sector jobs a month.

Ryssdal: Which doesn't sound so bad if we can keep that up.

Hartman: Well, actually, it's not really very good. It's just barely enough to keep up with the natural increase in the population. And plus, keep in mind, there are about 8 million people who lost jobs in the recession. Of course, a lot of those are looking. And some of them are also now coming back to look again, they might have given up for a while. And that's one reason why that unemployment rate, which went down in May, will probably go up again.

One person who's right on top of these numbers is Joel Prakken. He's at Macroeconomic Advisers. They're the ones who put out the monthly ADP report that counts private-sector jobs.

Joel Prakken: In a typical sort of recovery from a recession as deep as the one that we've just endured, you would expect to see monthly increases in employment that are measured in hundreds of thousands a month -- 300,000, possibly even a little bit more than that, for at least a while.

And Prakken explained the reason for that is employers usually cut back really hard on their most expensive cost, which is labor, when the economy is bad. That's so they don't just go out of business. And then business starts to pick up. And they suddenly have to add people right away. And a fair number of them just to get ahead of rising sales.

Ryssdal: So here's the rub though: If a regular recession usually leads to strong hiring coming out of it, why isn't this recession -- which has been deep and severe and horrible and all those words you can think of -- why hasn't that led to much stronger hiring?

Hartman: Part of it is just that the economy still isn't that strong. There's just so much to worry about: small businesses can't borrow, the banks are shaky, there's foreclosures. But there may also be something here about the way that employers are now thinking about labor that's new, about the number of people they actually need. Joel Prakken explains it this way.

Prakken: Businesses may have cut labor actually far more aggressively than turned out to be necessary. Having cut those employees, and discovered they could get by without a lot of them, it may be that you just discovered a one-time increase in efficiency that you're not going to be so quick to undo by hiring back workers too fast.

And we're seeing that in the fact that productivity's way up. Companies are churning out more widgets or websites or whatever per worker. And employers keep adding to people's work weeks. So people are working harder, they're putting in more overtime. And all of that allows employers to sell more stuff without actually adding jobs.

Ryssdal: And so we get reports like today's. Marketplace's Mitchell Hartman up at the Entrepreneurship Desk at Oregon Public Broadcasting. Mitchell is working, by the way, on a series about the effects of long-term unemployment. It's going to be on the air in a couple of weeks. Mitchell, thanks a lot.

Hartman: You're welcome.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.

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