Somewhere around 700,000 temporary workers were hired to assist with the 2010 Census. Now that their work is ending, these government employees will be thrust back into the weak U.S. job market. We began to see the effect this will have on unemployment in June, when the positions of 225,000 Census workers were eliminated, which resulted in a net decline of 125,000 jobs. As these job losses mount throughout the summer, how will they affect the labor market picture?
First, just how significant is it that 475,000 more Census workers will soon lose their jobs? Using the June employment data, if you add that number to the ranks of the unemployed, it would raise the rate from 9.5% to 9.8%. While that's not a huge rise, it's significant in the context of an economic recovery, where most people expect unemployment to decline, not to rise
It will also likely make for a summer of further labor market contraction. According to an article from the New York Times today, most of the remaining 475,000 Census jobs will be eliminated in July and August, and then a few more in September. If you assume that this and next month experience a similar exodus of Census workers from the population of employed Americans at 225,000 each, then that would leave another 25,000 let go in September. Next, take the three-month average of non-census job growth from April through June. With those projections, along with historical data, here's what you get:
You can see that the projected job growth would be easily overshadowed by the loss in Census jobs until September. Here's the net picture:
According to these projections and the actual results in June, it would mean a summer of 329,000 net job losses. It could take until winter before the labor market gets those back through three months of net positive gains, unless jobs grow at a rate of more than 110,000 per month starting in September. That might not sound like much, but so far this year, only two months -- March and April -- have seen non-Census job growth exceed 100,000.
The superficial labor market results will almost certainly look bad over the next few months, given the layoffs of Census workers. Even though the loss of these jobs doesn't really reflect economic deterioration, Americans who simply note the aggregate change throughout the summer might lose confidence in the recovery. If that happens, and spending pulls back, then that will make matters even worse for employment.