Economic Indicators | Jobs and Unemployment

Underlying labor market trend is around 150,000 jobs added per month

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The labor market began the second half of 2012 a little brighter than in recent months, with the Employment Situation report released by the Bureau of Labor Statistics showing the addition of 163,000 jobs in July and the unemployment rate holding roughly steady (increasing three one-hundredths of a point from 8.22 percent to 8.25 percent; the latter rounds to 8.3 percent).

July’s rate of job growth was much stronger than the weak growth of the spring. However, since the spring weakness was due in part to negative payback after warm-weather-generated hiring early in the year, July’s payroll job growth probably represents the underlying trend of the first half of the year. It is thus not necessarily indicative of new momentum.

MORE: State of Working America graphs with latest national employment and unemployment data

The average growth rate so far in 2012 is 151,000 jobs per month, similar to the average growth rate of 2011, which was 153,000 per month. Job growth like we’ve been seeing for the last year and a half—around 150,000 per month—is enough for the labor market to hold its ground as the population grows, but we need faster job growth to meaningfully bring down the unemployment rate. At the average job growth rate we’ve seen so far in 2012, it would take around a decade to get back to full employment.

Hours flat, wage growth improves but is still weak

The length of the average workweek held steady at 34.5 hours, where it has been (with minor fluctuations) since January. Average hours are close to their prerecession level of 34.6 hours. Average hourly wages for all private-sector workers increased by 1.0 percent (annualized) in July. The high unemployment of the last four years has exerted strong downward pressure on wage growth; average hourly wages grew 1.7 percent over the last year, a substantial decline from the prerecession rate of wage growth. Weekly wages, a measure that combines both hours and hourly wages, also grew just 1.0 percent (annualized) in July. Consumer spending is unlikely to rise unless income growth picks up.

Weak hiring means long-term unemployment remains high and labor force participation remains low

Because hiring remains very weak, at least three things are happening: In addition to the low wage growth just discussed, it is also the case that unemployed workers continue to get stuck in unemployment for long periods, and that labor force participation itself remains depressed.

  • The share of unemployed workers who have been unemployed for more than six months declined in July from 41.9 percent to 40.7 percent. (This is likely in part due to the scaling back of unemployment insurance benefits, as the requirement to look for work in order to maintain benefits kept some long-term unemployed actively seeking work and therefore counted as unemployed.) The long-term unemployed share is still far above normal (in 2007 the share averaged 17.5 percent).
  • The labor force participation rate fell one-tenth of a percentage point in July to 63.7 percent, near its low of the downturn (63.6 in April) and far below the 66.0 percent level of December 2007. It is likely that around two-thirds of the workers who make up the drop in the labor force participation rate since the start of the recession would be in the labor force if job prospects were strong. This translates into about 3.8 million “missing” workers. Job growth is not yet strong enough to start drawing them in.

Industry breakdowns

After six months of job numbers strongly affected by seasonal factors (strong job growth early in the year due to the warm winter, weak job growth in the spring as payback), job growth in July was likely a clearer read of the underlying trend.

Manufacturing gained 25,000 jobs, though some of the 12,800 gain in motor vehicles and parts was likely due to seasonal adjustment issues related to when and whether auto plants chose to close for retooling in July. Construction was basically flat (-1,000 jobs) after losing 5,300 per month for the first half of the year, and retail added 6,700 jobs, after gaining 3,500 per month on average for the first half of the year.

Health care has had two straight months of slow growth, adding 12,000 jobs in July and 11,300 in June, after adding 30,000 per month for the first five months of the year.

Restaurants and bars added 29,400 jobs in July, higher than the industry’s 18,900 average of the first half of the year. Temporary help services added 14,100 jobs in July, lower than the industry’s 21,500 average of the first half of the year. Temporary help services employment is still over 100,000 jobs below its level six years ago.

As has been the case for more than three years, budget crises at the state and local levels meant state and local jobs were cut. In July, state government employment lost 6,000 jobs, and local government employment dropped by 1,000 jobs. There was also a loss of 2,000 at the federal level. Since the recovery began in June 2009, the public sector has lost 642,000 jobs, an enormous drain (for more on the effect of public-sector job loss, see this recent EPI analysis).

Demographic breakdowns

Unemployment in July was 8.7 percent for those age 25 and older with a high school degree but no additional education, and 4.1 percent for those age 25 and older with a college degree or more. Among workers younger than age 25 who are not enrolled in school, unemployment over the last 12 months averaged 21.0 percent for those with a high school degree, and 8.2 percent for those with a college degree (annual averages are used here since seasonally adjusted data are not available for workers under age 25 by education). These numbers show that young workers have been particularly hard hit by unemployment. They also show that workers with higher levels of education have lower unemployment. However, workers at all levels of education have seen their unemployment rates roughly double since 2007, showing that demand for workers has dropped at all levels of education.

Racial and ethnic minorities continue to be hit particularly hard by unemployment. Unemployment in July was 14.1 percent for African American workers, 10.3 percent for Hispanic workers, and 7.4 percent for white workers. Racial and ethnic minorities have also been disproportionately hard hit by underemployment.

Men saw a much larger increase in unemployment than women did during the recession, but have seen stronger improvements in the recovery. The unemployment rate reached its prerecession low in late 2006 and early 2007, at 4.4 percent for men and 4.3 percent for women. Male unemployment peaked at 11.2 percent in October 2009 and has since fallen to 8.4 percent. Female unemployment continued to rise for about another year, when it peaked at 9.0 percent in November 2010, and has since fallen to 8.1 percent.

Conclusion

Despite ongoing improvements, the labor market still has a deficit of 9.7 million jobs, and the lack of demand for workers means unemployment durations remain high, labor force participation is weak, and wage growth for people with jobs remains low. One of the most effective ways for Congress to help remedy this situation would be to provide immediate aid to state and local governments to keep austerity in that sector from continuing to weigh down the recovery.

— Research assistance provided by Nicholas Finio, Natalie Sabadish, and Hilary Wething

See more work by Heidi Shierholz