Unemployment rate down, job loss up, factories hire, what gives?

The unemployment rate fell in June despite rising job losses because people are giving up looking for work -- conflicting indicators in an economic recovery struggling with a lack of jobs. Flickr photo.

The unemployment rate is the great ball and chain putting a drag on U.S. economic recovery. Its such a problem that even though the unemployment rate fell from 9.7 percent in May to 9.5 percent in June, more jobs were cut than were created. Jobless Americans dropping out of the labor force in droves skewed the stats in the jobs report. The stock market, accepting the numbers at face value, rose slightly Friday morning. But soon after a decline in factory orders was reported at 10 a.m., the Dow Jones Industrial Average lost 32.5 points. The turgid U.S. economy is full of conflicting information. Even as job creation, factory orders and consumer confidence fell, some manufacturing companies that want to hire can find workers with the kind of skills they need.

Unemployment rate, consumer confidence and everything else

The unemployment rate reverberates throughout the U.S. economy. An uncertain employment picture wreaks havoc on consumer confidence, which declined sharply in June. The decline in consumer confidence led to a decline in auto sales, and pushed pending home sales off a cliff as tax credits for home buyers expired. Consumer spending makes up 70 percent of the U.S. economy, and disposable income is a distant memory for millions of jobless workers.

Why the unemployment rate dropped:

The unemployment rate reached its lowest point since July 2009. But the Wall Street Journal reports that the decline wasn’t due to improvement in the labor market. A loss of 125,000 jobs should have increased June’s unemployment rate. But 652,000 people gave up looking for a job — the sharpest one-month decline in 15 years in the Labor Department’s survey. The Journal speculates that some could be choosing to pursue other options like school. Some are reaching the end of their unemployment benefits, which require an active job search. Whatever the reason, over the past two months almost 1 million people stopped looking for work.

New jobs a mismatch for many unemployed workers

The unemployment rate remains stubbornly high because plenty of people are still applying for the jobs. The New York Times reports that the problem is a mismatch between the kind of skilled workers needed and the ranks of the unemployed. During the recession, domestic manufacturers accelerated the long-term move toward more automation, laying off their lowest-skilled workers and replacing them with cheaper labor abroad. Now these companies need to hire people who can operate sophisticated computerized machinery, follow complex blueprints and demonstrate higher math skills  than old-school assembly line workers.

A silver lining in the jobs report?

One must dig deep to find some positives about the latest jobs report. The Washington Post reports that Friday’s jobs report could mean that the economic recovery that began last year has lost momentum, but the numbers are not so bad as to suggest the nation is heading into a double-dip recession. The numbers, although weak, show just how far the U.S. economy has fallen. The job growth number, for example, is a decline from stronger levels in March and April, but the June job creation number of a mere 83,000 is better than any month out of the past 31, other than the last two.