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Employment report shows that the recovery is losing its thrust
Howard Richman, 6/4/2010

On May 26, Ambrose Evans-Pritchard wrote that Larry Summers' call for a new $200bn stimulus was "a tacit admission that the economy is already losing thrust and may stall later this year as stimulus from the original $800bn package starts to fade."

Now we know what Summers was looking at. In all, employment rose by 431,000 jobs in May, but 411,000 of those jobs were temporary census workers, whose jobs will soon disappear.

The graph below of construction employment tells the story of a weakening recovery in the construction sector. After rising in March to 5,612,000 workers and April to 5,625,000 workers, construction employment fell in May to 5,591,000 workers.

Manufacturing employment was the one bright spot. It rose by 29,000 jobs in May, as shown in the following graph:

American manufacturing in March, April and May benefited from China's one month trade surplus in March, caused by a government-ordered commodity import surge. The result was temporarily higher commodity prices which increased purchasing power in the commodity producing countries world-wide. That surge overcame the effects of the weakening euro, which makes European goods relatively less expensive than American goods in world markets.

With China back to running trade surpluses and continuing to keep out America products, and with commodity prices falling and the euro continuing to weaken and the dollar continuing to strengthen, I predict that the one bright spot in the American economy, manufacturing employment, will soon resume its decline.