June 5, 2009
Regular readers of this blog know the drill. Another month, another unemployment stat when the BEA puts out its report for May 2009, which it usually does the first Friday of the month.
According to the release, May saw the official ("U-3") unemployment rate rise from 8.9 to 9.4 percent-a full half percent increase, for the second month in a row.
The "U-6 measure," the fullest calculation of "labor underutilization" regularly reported in the BEA stats (counting not just "total unemployed" but also marginally attached workers, discouraged workers and involuntary part-timers) went up from 15.8 percent of the work force in April to 16.4 percent in May.
Once again, this bad news is being packaged as a "good news, bad news" deal.
The good news is that the job loss rate is slowing. What this means when you look at the actual numbers is that 345,000 jobs were lost in May-a lousy number, but still less than the half million-plus seen in recent months.
Yet, the overall 9.4 percent number that resulted from this slower pace of loss is worse than what was expected (apparently, a 9.2 percent unemployment rate).
This implies a contradiction which has not been commented on (how can fewer job losses than expected track with more unemployment than expected?), and so one has to look below the surface of that number.
As it happens, the category that saw the main increase is people coping with long-term (15 weeks+) unemployment, which went up from 4 to 4.5 percent of the work force, this happening without depleting the other categories covered, there being "more where they came from."
One explanation for this is that more people are participating in the labor force. There is a tendency to think of this as an unusual, temporary aberration, but it may plausibly be taken to mean that the hard times have driven a certain percentage of people who earlier didn't feel that they had to work to look for employment (retirees who have watched their investments vanish; members of households coping with the loss of income, etc.)-skewing the figures perhaps, but in a way that reflects the current difficulties.
Additionally, it is worth noting that the "official" (9.4 percent) figure does not include those working on an involuntary part-time basis, a category which did see a slight increase during May, and may also be reflected in the cutbacks in hours worked. The work week is down to 33.1 hours, the shortest it's been "since recordkeeping began in 1964." As Liz Wolgemuth of U.S. News & World Report notes,
cost-cutting employers may have slowed their job shedding but continued to slash their employees' hours. Indeed, more than half of employers surveyed last month by outplacement firm Challenger, Gray & Christmas reported using cost-containment strategies such as cutting salaries and wages, while a smaller percentage were cutting staff.This must be recognized as a different strategy, distributing the economic pain differently, rather than clear-cut proof things are getting better.
While not related to the problem at hand, it is also worth noting that the steepest losses were in the sectors concerned with actually making things (particularly manufacturing, where 156,000 places were lost), whereas the sectors adding jobs were in services (health and government, particularly-with in the latter cases, federal employment seeing job losses, while education systems have done some hiring). Of course, this would seem to be a commonplace, manufacturing being more susceptible to such shocks, and quicker to let workers go, but given the long-term trend of U.S. deindustrialization this would seem to support Richard Moody's claim that the recession is creating a great deal of structural, rather than cyclical, unemployment.
Not inconsistent with such an outlook, James Galbraith recently predicted that not only will the official figure hit 10 percent, but that it will stay there for "a long time"-perhaps years (an assessment that brings to my mind the bleak picture projected for Ireland in the report by Ernst & Young I discussed last month).
Even the comparative optimists banking on a recovery in the third quarter of the year (July-September) expect the employment picture not to recover this year, improvements in the employment generally lagging recoveries (perhaps by up to a year in this case, according to one prediction).
My guess-looking at the collapse of business investment reported in last month's GDP data, and the data from earlier this week testifying to the weakness of consumption, is that while we may see some ups as well as downs in the months to come, the foundations of a really solid recovery have yet to be laid-and things could yet get worse than even Galbraith has speculated.
July 5, 2009
The BLS reported on Thursday, July 2, that the official (U-3) rate's 9.5 percent, while the more inclusive U-6 rate hit 16.5 percent. (In each case, the figure is up 0.1 percent from what it was in May.)
This report is apparently "not as bad" as what was expected (a 9.6 percent U-3 rate), even though the number of job losses was higher than forecast: 467,000 workers got pink slips, many more than the figure predicted (over 100,000 more actually, and close to 50 percent more than in May).
This lower-than-expected unemployment rate, despite higher-than-expected job losses, is all the more surprising given that the percentage of the labor force which is suffering long-term (15 weeks+) unemployment (the U-1 category) saw a big jump-from 4.5 percent in May to 5.1 percent in June (a full 0.6 percent).
At least part of the explanation would seem to lie in the shrinkage of the work force. While some economists last month were quick to point to the labor force's expansion as a factor in the high unemployment rate (it rose by over a million between January and May, which as I noted last month could be read as a sign of distress) the number dipped by over 150,000 from May to June (about 0.1 percent of the work force) as people drop out of the game, an issue rarely acknowledged in the press (Liz Wolgemuth of U.S. News & World Report, whom I also cited in my discussion of this issue last month, being the one exception I've come across).
In any case, simply counting up the number of unemployed understates the problem, because those who do have jobs are still seeing their hours drop. The average work week is now down to "33 hours . . . the lowest level on record," which combined with weak earnings growth (hourly earnings were flat), means falling income (even prior to adjustment for inflation).
As to the longer term picture: this recession has effectively erased the growth in employment of the last business cycle in its entirety, so that as far as the number of jobs available countrywide goes, we're back where we were in 2000, when the country's population was about 10 percent smaller. (And it is well worth noting that manufacturing has been especially hard hit, again accounting disproportionately for the lost jobs-136,000 of them, or almost 30 percent-speeding us further and faster along the road to deindustrialization.)
Of course, there is still plenty of optimism among the talking heads, still promising a turnaround in the "second half of the year" (which we have just entered). One reason is that announcements of layoffs to come seem to have fallen to their lowest levels in 15 months.
Still, the general expectation is that unemployment will hit 10 percent later this year, and just as the talk of "growth" has meant increasingly less to those who actually have to work for money, so will "recovery" (likely to take years where job creation is concerned, in even the optimitsic forecasts-even some mainstream ones being much worse) mean little as this "indicator" (if you actually need a job to live, it's far more than that to you) continues to lag.
November 16, 2009
As was widely reported in the press, we hit (and passed) the much talked-about milestone: 10 percent of the American work force "officially" unemployed.
The actual number is, of course, 10.2 percent.
The figure denoting long-term job losers (15+ weeks out of work) is likewise up, to 5.7 percent (compared with 2.7 percent of the work force exactly one year ago, when the panic was at its height).
And of course, the broader, U-6 category, now stands at 17.5 percent-more than one in six members of the work force presently lacking the full-time work they wish they had.
For a better than average assessment of the news, check out this post from Seeking Alpha.
Also worthwhile from the standpoint of perspective, this article from Tom Raum of the Associated Press confirms the increasingly mainstream character of the view that this unemployment is structural than cyclical. (Remember Richard Moody's comment from a few months back, or the story from the Christian Science Monitor asking if the U.S. is "the New France"?)
Raum specifically points to, among other things, the vicious cycle at the root of the situation, the weakness of the job market (along with the credit crunch) suppressing the consumption that would be key to the new investments that would drive job growth (in fact, it may be that Americans are already "settling into spending less"). The situation is all the worse for "the carnage among Detroit's automakers and the surplus of new and foreclosed homes and empty commercial properties," the auto- and construction industries, two keys to the renewal of employment expansion in the past, having been left in an especially poor position to play the role of economic locomotive anytime soon. (Indeed, both manufacturing and construction suffered 60,000+ net job losses each last month, a particularly dark spot in this 22nd straight month of job losses.)
So much for the ebullient talk of green shoots; the hope of anything more than a shallow, short-term fix leading to still more long term mess from the methods tried; and in the sweeping of harsher economic realities under the rug as the Dow Jones average rebounds, the hope that governments would move beyond "business as usual" after the cold shock of reality afforded by the Great Recession of 2007-2009 (as noted by Mike Whitney of the Centre for Research on Globalization in his sweeping overview of the economic policy of the Obama administration, one year in).
December 4, 2009
The official, U-3, unemployment rate has edged down from 10.2 percent in October, to 10 percent in November, according to today's report from the Bureau of Labor Statistics.
Additionally, the U-6 rate went down by an even larger margin, from 17.5 percent in the last report, to 17.2 percent in this one.
However, a quick check shows that the number of long-term unemployed actually climbed, from 5.7 percent in October to 5.9 percent in November. The improvement, as Kurt Brouwers of Marketwatch suggests, may simply be "a statistical change rather than a real improvement" due to a number of frustrated job-seekers giving up the hunt.
In other words, the fact that people give up looking for work because the situation is so awful ends up, perversely, looking like a sign of improvement.
It also seems that, as Briefing.com suggests, the "drop in payrolls was entirely driven by goods-producing firms shedding jobs. Goods-producing companies lost 69,000 jobs in November." Read: manufacturing and construction. This is also bad news rarely commented upon, fashionable as it may be to slight actual goods production as trivial.
As always, the details count.
The U-3 unemployment rate held steady until last month, remaining officially at 9.7 percent-a point which is of course being spun in the usual ways-like "Wasn't that a close one? We thought it'd be worse!" or "We've stabilized, which means we can only go up from here!"
Less noted was the fact that the broader U-6 rate, after seasonal adjustment, actually saw a slight uptick-from 16.5 to 16.8 percent.
It may be that the Census (which will see the hiring of a half million workers) will trim the numbers slightly in the next few months, but this is a short-lived blip, while observers continue to wait for signs of real strength in critical sectors. Construction suffered last month, still shedding plenty of jobs-64,000 is the figure I'm seeing-but economists chalk that up to the unusually rough winter weather. (Given the trend over the last year, however, I'm not sure how much difference it made.) Manufacturing has seen some hiring, but the car industry clearly saw job losses-10,000 in February after the uptick of the previous month, and John Schmid of the Milwaukee-Wisconsin Journal-Sentinel is right to refer to the sector's "erratic fluctuations," of which this may simply be one.
Even the relatively upbeat report from Business Week does not question the widespread expectation of a slow labor market recovery-a pessimism that affects not only the officially unemployed, but the underemployed as well, according to Gallup tracking polls from January. Notably, the pessimism is far stronger among those with postgraduate degrees than those who just have "some college or vocational school," with sixty-five percent in the former category giving the "not optimistic" answer, compared to forty-two percent in the latter. (Those looking for broader coverage of those confronting such downward mobility can check out Peter S. Goodman's four-pager in the New York Times last month.)
That the matter of employment is still being discussed as something apart and different from the broader issue of an economic recovery, the "conventional wisdom" from before "the Great Recession" still going strong.
February 5, 2010
The (seasonally adjusted) figures for January have the U-3 unemployment rate at 9.7 percent-a small drop from the previous month's figure of 10 percent, and down further still from the recent peak of 10.2 percent reported late last year (since revised down to 10.1 percent).
The U-6 figure also fell back to 16.5 percent.
In short, the numbers seem slightly better. However, they remain essentially lousy, and a detailed examination of the picture hardly improves its appearance.
For one thing, as Steve Schaefer reports in a market brief at Forbes.com reports, there has been no actual job growth-with the economy overall suffering job losses (20,000, with gains in retail and temp hiring overcome by declines in employment in transport and warehousing).
This is notable, especially in light of a bit of buzz last month regarding reports of a 5.7 percent GDP growth rate in the fourth quarter of 2009-which, as Schaefer notes, was due mainly to the restocking of inventories (3.4 percent of that 5.7 percent increase in output) rather than some revival of consumer demand (where would it come from, with unemployment, anxiety and credit as they are?) or really new investment. In short, it's not likely to last, and a really substantive recovery from "The Great Recession"-even to the mediocre state of things antecedent to 2007 (so easily forgotten given the past-quarter, this-quarter, next-quarter perspective of too much business journalism)-far from realized.
March 6, 2010
The U-3 unemployment rate held steady until last month, remaining officially at 9.7 percent-a point which is of course being spun in the usual ways-like "Wasn't that a close one? We thought it'd be worse!" or "We've stabilized, which means we can only go up from here!"
Less noted was the fact that the broader U-6 rate, after seasonal adjustment, actually saw a slight uptick-from 16.5 to 16.8 percent.
It may be that the Census (which will see the hiring of a half million workers) will trim the numbers slightly in the next few months, but this is a short-lived blip, while observers continue to wait for signs of real strength in critical sectors. Construction suffered last month, still shedding plenty of jobs-64,000 is the figure I'm seeing-but economists chalk that up to the unusually rough winter weather. (Given the trend over the last year, however, I'm not sure how much difference it made.) Manufacturing has seen some hiring, but the car industry clearly saw job losses-10,000 in February after the uptick of the previous month, and John Schmid of the Milwaukee-Wisconsin Journal-Sentinel is right to refer to the sector's "erratic fluctuations," of which this may simply be one.
Even the relatively upbeat report from Business Week does not question the widespread expectation of a slow labor market recovery-a pessimism that affects not only the officially unemployed, but the underemployed as well, according to Gallup tracking polls from January. Notably, the pessimism is far stronger among those with postgraduate degrees than those who just have "some college or vocational school," with sixty-five percent in the former category giving the "not optimistic" answer, compared to forty-two percent in the latter. (Those looking for broader coverage of those confronting such downward mobility can check out Peter S. Goodman's four-pager in the New York Times last month.)
That the matter of employment is still being discussed as something apart and different from the broader issue of an economic recovery, the "conventional wisdom" from before "the Great Recession" still going strong.
April 2, 2010
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.
October 8, 2010
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.)
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