Friday, April 2, 2010

The Real Unemployment Rate

The Bureau of Labor Statistics' latest figures on unemployment have the U-3 rate holding steady at 9.7 percent, while the U-6 rate has ticked upward to 16.9 percent (from 16.8 the previous month).

Hiring is supposed to be a bit stronger, with employers adding 162,000 jobs in March (touted as the largest addition in three years).

This is not bad news, but unspectacular news. Given that the recession added another 8 million jobless, simply to return to where the economy was in 2007-never mind alleviating the situation of those who had already been unemployed or underemployed, or accommodating new entrants to the job market-will take fifty months of progress at that rate, over four years without setbacks.

Of course, trends are rarely so constant-and deceleration or reversal seem more plausible than acceleration. One positive sign is that manufacturing payrolls increased, but only by about 17,000 (10% of the total). Meanwhile, as the Los Angeles Times notes, "about 30% of the payroll increases over the last month, or 48,000 jobs, were created by the Census Bureau"-helpful, but temporary, and far from being proof of robust long-term job growth in the private sector.

John Canally of LPL Financial is quoted in the Christian Science Monitor as saying that the natural job growth rate (which this data would support) is more along the lines of 100,000 jobs a month-at which rate it would be some eighty months, or almost seven years, to return to pre-recession employment levels-2017, before the market recovers to where it was in 2007.

Even those numbers, however, merit some extra scrutiny. On top of the Census jobs, there were another 40,000 private sector temp jobs in that payroll increase-better than nothing (and a sign of improvement), but not an unambiguously positive sign for those concerned with the underemployment the U-3 figures overlook. After all, it seems only too plausible that this recession will mean a long-term increase in the percentage of the work force working as temps who wish they were full-timers.

And of course, there is the continued tightness of credit and the implausibility of much increase in consumer spending so long as people remain jobless, or insecure in their jobs.

In short, even if things do start to brighten, the effects of this decade's financial disaster will almost certainly be felt for years to come.

My Writings on the Recession (A Listing)

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