The US economy added just about 80,000 jobs in the month of October according to a Labor Department report, down from the 158,000 jobs added in September. Though this pulled the unemployment rate down to 9% from 9.1%, it was the slowest pace of growth in the past four months. This development does put away the fear of the chances of the US economy slipping into a double dip recession, but the growth is not sufficient to pull the US economy to a higher level of growth and is not good enough to address the nearly 8.5 million jobs lost during the recession. Of concern is also the fact that the growth is coming more from the low paying sectors as against the high paying ones. This does less to put money into the consumer's wallets and accelerate consumption expenditure. As 70% of the US economy is based on consumption expenditure, the structure of the jobs growth does less for the US.
The maximum number of jobs added was in the leisure sector amounting to 22000 jobs. The average pay in this area is just about $13 an hour. Retail trade, which pays around $16 an hour, added 178000 jobs. In contrast, the manufacturing sector, which pays around $24 an hour, added just 5000 jobs in October after shedding jobs for two prior consecutive months. If this suggests that the US manufacturing sector is weakening, then it does not bode well for the economy and the nation's trade deficit as it will lead to an increase in imports of manufactured products. The US is already running a massive trade deficit of $29 billion with China. This will only get worse if the trend continues. Another key indicator was the reduction in the quantum of construction workers. Jobs were pared in this sector to the tune of 20000. This suggests that the construction industry, which is core to the US economy and a key indicator, is not faring well.
The travails of the US economy are not just linked to its issues, but extend beyond its borders to the debt crisis of Europe, due to the integrated nature of present day global economics. The reason for this is that the European zone is the second largest trading partner for the US after Canada. Exports to Europe account for nearly 19% of US exports are amount to around $ 240 billion. This means that any crisis leading to the European economy becoming unstable could have a significant impact on the US economy. If demand for European imports from the US dampens due to a crisis in the Euro zone, it could further slow down the pace of recovery in the US by impacting employment generation.
Thus, the constrained jobs addition in the US and the developments in Europe at this point of time seem to be keeping the US economic recovery process contained. US policy makers need to factor in these issues while responding to the need of the hour and designing fiscal and monetary stimulus to accelerate the US economic recovery process.
The maximum number of jobs added was in the leisure sector amounting to 22000 jobs. The average pay in this area is just about $13 an hour. Retail trade, which pays around $16 an hour, added 178000 jobs. In contrast, the manufacturing sector, which pays around $24 an hour, added just 5000 jobs in October after shedding jobs for two prior consecutive months. If this suggests that the US manufacturing sector is weakening, then it does not bode well for the economy and the nation's trade deficit as it will lead to an increase in imports of manufactured products. The US is already running a massive trade deficit of $29 billion with China. This will only get worse if the trend continues. Another key indicator was the reduction in the quantum of construction workers. Jobs were pared in this sector to the tune of 20000. This suggests that the construction industry, which is core to the US economy and a key indicator, is not faring well.
The travails of the US economy are not just linked to its issues, but extend beyond its borders to the debt crisis of Europe, due to the integrated nature of present day global economics. The reason for this is that the European zone is the second largest trading partner for the US after Canada. Exports to Europe account for nearly 19% of US exports are amount to around $ 240 billion. This means that any crisis leading to the European economy becoming unstable could have a significant impact on the US economy. If demand for European imports from the US dampens due to a crisis in the Euro zone, it could further slow down the pace of recovery in the US by impacting employment generation.
Thus, the constrained jobs addition in the US and the developments in Europe at this point of time seem to be keeping the US economic recovery process contained. US policy makers need to factor in these issues while responding to the need of the hour and designing fiscal and monetary stimulus to accelerate the US economic recovery process.
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