Could the month's poor performance in these two sectors reveal the true gravity of the labor market's woes?

600 retail REUTERS Shannon Stapleton.jpg

By now, you probably know that Friday's unemployment report for August was awful. It asserted that zero jobs were created during the month and that the unemployment rate remained at an uncomfortably high 9.1%. Yet, the two government surveys conflicted. One claimed that about 300,000 jobs were created in August. So the precise status of the labor market remains uncertain. But a grim reality might be clearer if the manufacturing and retail industries are considered.

These two sectors took a big step back in August. How big? Check out the following chart, which shows the three-month average number of jobs added or lost each month for the two sectors:

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Those two points show the number of jobs lost in August for the two sectors. These statistics are also included in the three-month average curves.

You can see pretty clearly just how bad August was for these two sectors. Manufacturing had been pretty steadily growing over the past year. But the three-year average has been trending down. August was the first month during which the sector lost jobs since last October.

The story is similar for retail. Although its growth hasn't been as consistent, it has also been adding jobs fairly consistently since last fall. Its three-month average is also trending down.

Why do these sectors matter? Each had begun to recover in 2010. If they're reversing course, then other industries could soon follow. But each are also very important sectors for their own sake. The decline in retail jobs, in particular, implies that consumer demand is actually falling, which is what's driving retailers to reduce their workers. If that's the case, and the trend continues, then the recovery could be doomed.

Image Credit: REUTERS/Shannon Stapleton

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