The Labor Department reported today that the economy lost 345,000 jobs in May and the unemployment rate increased to 9.4 percent, the highest level since July 1983. The job decline in May brings the number of consecutive monthly employment declines in this recession to 17, matching the longest post-WWII streak set during the 1981-1982 recession.
While this record-tying decline in employment shows that the labor market continues to be weak, there are some signs that the worst of the recession is clearly in the rear view mirror. After accelerating over six consecutive months, culminating with a 741,000 employment decline in January, job losses have moderated over the past four months, with the decline in May being the shallowest drop in eight months.
While employment in the rest of the workforce fell by less than 200,000 in May for the first time in nine months, the 156,000 decline in manufacturing employment was nearly identical to the decline during the prior month. Though considerably below the 262,000 jobs lost in January, continued sizable employment declines show that manufacturers remain in the longest and deepest downturn since the Great Depression. The largest employment losses in manufacturing last month took place in motor vehicles, machinery, metals, computer and electronic products, and plastics rubber products. Combined these sectors accounted for more than two-thirds of the decline in manufacturing employment last month, clearly reflecting the effects of the turmoil in the auto sector along with weak demand, both here and abroad, for business investment products.
The good news is that new orders for capital goods domestically have started to improve over the past few months, and there are signs that some markets overseas are starting to improve. If these trends continue, employment declines in manufacturing should moderate more significantly in the second half of the year.