June Economic Advisory Note

US private sector employment continued to grow in May, but at a rate that reflects a stalling recovery. If June & July 2010 are as weak as May, the furtive recovery could be jeopardized, as consumer incomes and spending are curtailed. In terms of private sector employment (+41,000) there was barely any forward momentum in May: 3 out of every 4 new positions were created by temporary hiring services, continuing a year-long trend for this business class. Apart from the 411,000 Census hires, the fiscal crisis of the states continues to impinge on any recovery. Stressed state governments cut 15,000 jobs in May - 13,000 of them outside of education.

In terms of insurable payroll exposures, there are still too few bright spots to describe them as "recovering". On a year-over-year basis, private payrolls for 2-digit NAICS sectors remain below the April 2009 level (inflation adjusted), with the exception of mining (Sector 22) and utilities (Sector 23) -- the former boosted substantially by the ongoing BP disaster / clean-up in the Gulf.

Manufacturing remains one of the few relatively bright spots. Although inflation adjusted payrolls are essentially flat relative to last year, manufacturing is pretty much the only economically significant sector that has gained momentum this Spring. Over the last three months (March-May), manufacturing payrolls are up 2.7 percent. Continued growth in manufacturing will be key for any reasonable chance for recovery through 2010-2011.