Friday, October 8, 2010

The Real Unemployment Rate

Last month the National Bureau of Economic Research declared the "Great Recession" officially over as of June 2009.

Still, you wouldn't know it to look at the unemployment data that came out today. "Labor underutilization"'s at 9.6 percent according to the U-3 measure, 17.1 percent according to the U-6--which not only represents a 0.4 percent rise over August, but is actually slightly higher than last September's figure (a flat 17 percent).

As Steve Schaefer of Forbes notes, the slight increase in the number of unemployed that resulted in this figure was due mainly to government layoffs, "split almost evenly between the end of temporary census jobs and cuts at the state and local levels." This overwhelmed the slight rise in private sector hiring, mostly in the service sector, health care and food services in particular (the two, adding some 24,000 and 34,000 jobs respectively, almost equal to the total increase of 64,000 by themselves). Construction and manufacturing are still shedding jobs (those sectors down by 21,000 and 6,000 respectively last month, the improvement in manufacturing earlier this year really just about restocking inventory after all).

The fact that government is still cutting so many jobs--with jobs in education "declining substantially due to budget woes" (as Joshua Shapiro of MFR Inc. has noted)--is a worrisome sign, and Jay Feldman of Credit Suisse would seem all too right when he notes that "The state and local fiscal crisis is clearly leaving a deeper imprint on aggregate economic activity." The decline in construction and manufacturing, those two crucial engines of employment and growth, is likewise telling, as is the predictable obverse of the fact, namely that the increase in private-sector employment has been mainly "in bar and restaurant jobs . . . not exactly known for the good pay and benefits," as Paul Ashworth of Capital Economics notes.

Taken together they all indicate the frailty of the job market, and reminders not only of the continued weakness of demand, but the likelihood that demand will remain weak for some time to come.

It's all getting awfully monotonous (which is one reason why this is no longer a monthly feature of this blog).

Meanwhile, in other (related) economic news:

* Banks have failed even faster in 2010 than they did in 2009 (bringing the total since Washington Mutual's collapse in September 2008 up to 279 this past month) and there is little sign of the rate falling off, as Randall Smith and Robin Sidel of the Wall Street Journal note in their "anniversary" piece from two weeks ago.

* The issue of income inequality inside the United States has got more than the usual amount of attention in the press in recent weeks, due primarily to two events. One is the U.S. Census Bureau's annual publication of its data on income distribution. (The country's Gini index, as it happens, is now 0.468, which would make the U.S. equal to Rwanda, according to the CIA World Factbook.) The other is the release in September (just two days before the Census report came out) of Paul Pierson and Jacob S. Hacker's book Winner-Take-All-Politics: How Washington Made the Rich Richer and Turned its Back on the Middle Class, described in a piece in the Atlantic Wire sampling response to it as "a synthesis of recent studies" of the subject. (Ezra Klein, blogging at the Washington Post, also takes a look at the book, presenting Pierson and Hacker's data regarding what the current picture would have looked like "if growth had been equal" in graph form.)

My Writings on the Recession (A Listing)

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