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EconomicPolicyInstitute May 13, 2010

The April employment report last Friday brought the good news of the strongest rate of job growth in four years, but at the same time showed the unemployment rate rising to 9.9% from 9.7% in March. These are seemingly conflicting patterns, but they are also exactly what EPI has repeatedly forecast would occur as a large number of people who had dropped out or never entered the labor force began looking for work.

Economist Heidi Shierholz, in her analysis of the monthly jobs data, explained that the healthy increase of 290,000 payroll jobs in April was not large enough to keep the unemployment rate from rising, because 805,000 workers entered the labor force that month.

These data are consistent with what both Shierholz and EPI President Lawrence Mishel have consistently predicted: When jobs growth finally resumed, unemployment rates would continue to rise as large numbers of “missing workers” entered or re-entered the workforce. “There is a large group of people not currently counted as unemployed—the missing labor force—who reasonably can be expected to start looking for work when job growth resumes,” Mishel said in February testimony to Congress about the urgent need for more jobs. At that time, he estimated that the labor force was missing millions of workers, many who had grown discouraged by poor job prospects, had stopped looking for work, and as a result were no longer counted as unemployed—even though they did not have jobs.

Those so-called missing workers showed up in force in the Labor Department’s April unemployment report. In her analysis, Shierholz said there remained a sizable backlog of people waiting to enter the job market. She noted that population growth alone from the start of the recession in December 2007 until April 2010 should have added about 3.2 million workers, but instead the labor market grew by a much smaller 846,000 workers over that 29-month period. “This means that there are now roughly 2.4 million ‘missing workers,‘” Shierholz wrote. It also means that even as the economy continues to enjoy job growth, the unemployment rate, which has hovered close to 10% for the better part of a year, could remain high, or even rise. Mishel predicts unemployment will peak above 10% in the fall of this year and remain around that level until early 2011. Without aggressive job creation efforts, he says unemployment will remain unacceptably high for years to come.

Class of 2010 faces worst job market in a quarter century
High rates of unemployment are creating a particularly tough job market for new high school and college graduates. A new EPI paper, The Class of 2010, shows that unemployment rates for workers under age 25 are nearly double their pre-recession levels. The paper, by economist Josh Bivens and researchers Kathryn Anne Edwards, Alexander Hertel-Fernandez, and Anna Turner, also outlines several damaging consequences of high rates of joblessness among recent high school and college graduates. Many of these young adults who cannot find jobs will fall through the public safety net since in most states eligibility for unemployment insurance is contingent on having a recent work history. Research has also shown that graduating during a recession can limit an individual’s lifelong earnings potential.

Getting the facts straight on immigration and summer employment
EPI disputes the findings of a new paper by the Center for Immigration Studies (CIS), which claims that immigration is a significant cause of the decline in summer employment among young people, ages 16 to 19. In response to that paper, economist Heidi Shierholz has published a Policy Memo showing that the declining youth employment levels must be examined in relation to dramatic increases in school enrollment. While the share of teens employed in the summer has generally declined in recent decades, Shierholz shows that the share of teens enrolled in school over the summer has increased from 19.4% in 1989 to 51% in 2007. While being enrolled in school does not entirely insulate young people from the dynamics of the labor market, Shierholz argues that excluding school enrollment levels from the discussion “calls into serious question the conclusions of the CIS paper.”

EPI in the news
EPI’s analysis of the April jobs data received widespread press coverage. A story on NPR’s Nightly Business Report quoted Shierholz explaining how high unemployment puts downward pressure on wage growth, which could impact family income for years to come. Shierholz was also quoted in an ABC News story discussing the large ratio between job seekers to job openings, and in a Wall Street Journal piece showing how black college graduates had much higher rates of unemployment than their white counterparts. The Atlantic cited EPI’s research on the job market for recent graduates. EPI Vice President Ross Eisenbrey published a piece in The Huffington Post stressing that the rising U.S. deficit was the result of a “jobs deficit” that had left a staggering 27 million Americans either unemployed or underemployed. “That crisis, not our long-term budget deficit, should be driving fiscal policy,” Eisenbrey wrote.

Upcoming events
On Friday, May 14, EPI researcher Alexander Hertel-Fernandez will release the paper A New Deal for Young Adults at a panel discussion on Capitol Hill. The paper looks at Social Security benefits for children who have lost parental support because of death or disability, and makes the case for extending these benefits from age 18 to age 22. The event runs from 10 a.m. until 11:30 a.m. at H-137 Capitol Building, and will also be available via live webcast.

From the EPI Blog
Elise Gould
New Wages and Salaries Data from the Employment Cost Index Show Yet Again It’s Not Quite Time To Declare Mission Accomplished  
Valerie Wilson
Who Among African Americans is Counted in the Labor Market and in the Voting Booth?
Josh Bivens
Yes, GDP Is Up. But the Recovery Hasn’t Broken Through.
Joshua Smith
Myths and Facts About Corporate Taxes, Part 3: Are American Companies’ Profits Trapped Overseas?
Joshua Smith
High-income Households Pay a Large Share of US Taxes—But This Doesn’t Make Our Tax System Progressive
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