Thursday, July 1, 2010

Census layoffs distort job numbers

WASHINGTON — For the first time in six months, the federal unemployment report to be released Friday will likely show a net loss of jobs.
But hold off on the panic button.

It's true that employers are expected to have cut more than 100,000 jobs in June. But that figure, if accurate, will be deceptive. It will reflect the end of up to 250,000 temporary census jobs. The real focus Friday will be on how many net jobs private employers created.

"People are looking past the census effect," said Alec Phillips, an economist at Goldman Sachs.

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Analysts predict private businesses added 112,000 jobs in June, according to a survey by Thomson Reuters. That would be a healthy rebound from May's 41,000 gain. But it's far from enough to signal a roaring recovery or rapidly reduce the unemployment rate, now at 9.7 percent. It would take a net gain of around 200,000 jobs a month to quickly reduce that rate.

The plunge in census jobs comes just a month after the government added nearly a half-million people to conduct door-to-door visits and other tasks. The census began hiring more workers last year. It added about 500,000 this spring.

The rapid switch from hiring to firing reflects the short-term nature of census jobs. Most jobs are part time and last six to eight weeks.

The decline in census workers isn't expected to have much effect on the jobless rate. Analysts predict the rate will edge up to 9.8 percent in June from 9.7 percent in May. In part that's because Phillips estimates that about half the temporary census hires also held other jobs. So they won't be counted as unemployed once their census job ends.

The elimination of 250,000 census jobs could lower personal income slightly in June, according to Nigel Gault, chief U.S. economist at IHS Global Insight. But "it's minor relative to a lot of other things going on," he said.

Employers boosted pay in May. Employees also worked more hours. Together, that lifted income by a healthy 0.5 percent last month, the Commerce Department said earlier this week.

But other recent reports have raised fears that the economic recovery is stalling.

A sharp drop in consumer confidence sent stocks tumbling Tuesday — and the selling continued Wednesday.

Other factors also have rattled nerves. China's economy is slowing, the U.S. housing market is sputtering and leaders of the world's richer nations have pledged sharp cuts in their deficits.

Given the sour outlook, a June employment report that showed a net gain of 112,000 private-sector jobs would be "greeted with a mild sigh of relief," Gault said. Such a gain would suggest the recovery is still on track, he said.

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