Private Sector Employment Rise Can Compensate for Decline in Public Sector

June 21, 2012 /

Nonfarm payroll employment changed little in May (+69,000), and the unemployment rate was essentially unchanged at 8.2 percent, the U.S. Bureau of Labor Statistics reported.

Employment increased in health care, transportation and warehousing, and wholesale trade but declined in construction. Employment was little changed in most other major industries.

Among the major worker groups, the unemployment rates for adult men (7.8 percent) and Hispanics (11.0 percent) edged up in May, while the rates for adult women (7.4 percent), teenagers (24.6 percent), whites (7.4 percent), and blacks (13.6 percent) showed little or no change. The jobless rate for Asians was 5.2 percent in May (not seasonally
adjusted), down from 7.0 percent a year earlier.

The number of long-term unemployed (those jobless for 27 weeks and over) rose from 5.1 to 5.4 million in May. These individuals accounted for 42.8 percent of the unemployed.

Furthermore, public sector jobs fell by 39,000 between February and April to 5.9 million, the lowest level in nine years, according to the Office for National Statistics.

UK ministers said the drop in the public sector jobs reflected a “deliberate policy shift to promote private sector employment”, which rose by 205,000, the second-strongest three-month figure in 13 years.

Alan Downey, partner and head of public sector at KPMG, said: “Public sector headcount is continuing to fall rapidly. That comes as no surprise – it is an inevitable consequence of the government’s deficit reduction strategy. Nor should we be unduly worried, as there is no necessary relationship between the number of public servants and the quality of public services: so long as productivity improves, the public sector will be able to provide high quality services with a significantly smaller workforce.

“The big challenge for the government – and for the country as a whole – is to ensure that private sector employment increases at a pace that more than compensates for the decline in the public sector. These figures suggest that the equation is working, as the increase of 250,000 in private sector employment dwarves the fall of 39,000 in the public sector. This is not only good for the economy in general, but also good news for those public servants who have lost their jobs, as it suggests there will be opportunities for them to find work in the private sector.”

Meanwhile, Bernard Brown, partner and head of business services at KPMG, warned that the “employment figures should be welcomed with caution.”

Brown said: “Despite all the talk about double-dip recessions and crises across the Euro Zone, its welcome news that unemployment has fallen again. It seems that, with April and May’s figures still front of mind we are now witnessing an improvement in the fortunes of the UK’s current and prospective workforce. It must be encouraging news for the thousands of individuals about to leave the comfort of university halls and hoping to take their first steps on the career ladder.

”However, good news though this is, the fact remains that we should not celebrate too soon. Even though KPMG’s own figures show that the number of people securing permanent jobs has risen for the fifth consecutive month we have not yet turned a corner. The latest figures represent the lowest monthly rise since last December, indicating a return to uncertainty and cautiousness when it comes to recruitment.

“Further, the recent launch of the A-Plus plan by the Chancellor and Governor of the Bank of England suggests that the economy needs an injection to cure its current ills. Couple this with the aftermath of the Greek election, and it’s easy to see why employers across the UK are still not breathing easily. A solution to the Euro Zone crisis is still nowhere in sight and with debates from this week’s G20 summit ringing in our ears, the brief must be a watching one.”


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