Economic Indicators | Jobs and Unemployment

Job market stuck on ‘‘pause’’

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EPI’s Jobs Picture for March 5th, 2010

This morning’s Bureau of Labor Statistics employment report showed 36,000 payroll jobs lost in February, though a portion of that decline may have been due to the record snowstorms along the east coast.  The data in the household survey, used to calculate the unemployment rate, was likely less affected by the storms, and thus showed conditions in the labor market holding steady in February, with the unemployment remaining at 9.7%. 

However, the underemployment rate (which includes not just the officially unemployed, but also jobless workers who have given up looking for work and part-time workers who want full time jobs) rose from 16.5% to 16.8%, offsetting some of the gains made in January, as the number of involuntary part-timers increased by nearly half a million workers.  In February, there were 2.6 million marginally attached workers, 8.8 million involuntary part-timers, and 14.9 million unemployed workers in the United States, for a total of 26.2 million workers who are either unemployed or underemployed.  

With over six unemployed workers per job opening, unemployed workers continue to have an extremely difficult time finding work.  In February, the average unemployment spell was 29.7 weeks, and the median unemployment spell was 19.4 weeks, both slight improvements from January.   In February, for the first time in over a year, the number of long-term unemployed (workers without jobs for more than six months) decreased (by 180,000), but still remains extremely high at 6.1 million.  More than two in every five unemployed workers in this country have been unemployed for over six months. 

The chart below shows the long-term unemployment rate—the percent of the labor force that has been unemployed for more than six months.  February’s value of 4.0% dwarfs even the recession of the early 1980s, a recession that was marked by extremely high unemployment. 

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Since the start of the recession in December 2007, the labor market has shed 8.4 million payroll jobs.  This number, however, understates the size of the gap in the labor market by failing to take into account continuing population growth: the labor market should have added around 2.7 million jobs since December 2007 to accommodate this growth.  This means the labor market is now roughly 11.1 million jobs below what would be needed to restore the pre-recession unemployment rate.  In order to fully fill in this 11.1 million job gap in the labor market in the next three years (by February 2013), employment would have to increase by 415,000 jobs every month between now and then.  (Note: The methodology for calculating the size of the gap and what would be needed to fill it can be found at the end of this report.) 

And even the 11.1 million jobs gap understates the slack in the labor market because it fails to take into account the decline in hours worked for those who have kept their jobs.  At the start of the recession in December 2007, the length of the average workweek in the private sector was 34.7 hours.  In February, it was 33.8 hours.  The decline in the total number of hours worked in the private sector since the start of the recession attributable to reduced hours alone (i.e., not job loss) is equivalent to 2.8 million jobs.  This means that the “effective” gap in the labor market is on the order of 13.9 million jobs (11.1 million plus 2.8 million). 

It should be noted that the length of the average workweek decreased slightly in February, from 33.9 to 33.8 hours, but that was likely a reflection of time lost due to the severe winter weather rather than continued deterioration in hours. 

Demographic breakdowns in unemployment show that, while all major groups have experienced substantial increases over this downturn, men, racial and ethnic minorities, young workers, and workers with lower levels of schooling are getting hit particularly hard. 

  • In February, unemployment was 18.5% among workers age 16-24, 8.6% among workers age 25-54, and 7.1% among workers age 55+ (increases of 6.7, 4.5, and 3.9 percentage points, respectively, since the start of the recession).
  • Unemployment was 15.8% among black workers, 12.4% among Hispanic workers, and 8.8% among white workers (increases of 6.8, 6.1, and 4.4 percentage points, respectively, since the start of the recession).
  • Unemployment was 10.7% for men, compared to 8.6% for women (increases of 5.6 and 3.7 percentage points since the start of the recession).
  • For workers age 25 or older, unemployment reached 10.5% for high school educated workers and 5% for those with a college degree (increases of 5.8 and 2.9 percentage points, respectively, since the start of the recession).

Nominal hourly wage growth has been generally slowing since the summer of 2008 and remains low—nominal hourly wages grew at a 1.3% annualized rate over the last three months.   With inflation currently at around 2.3%, this means real wages are falling.  Average weekly earnings had seen recent improvements, though the fall in hours (likely due to the snowstorms) meant nominal weekly paychecks did not see growth in February (down by $1.23).

One good sign in the payroll data was in temporary help services, which added 47,500 jobs, the fifth straight month of gains. This is good news because this sector tends to lead broader recoveries.  One key sector holding steady was manufacturing, with the addition of 1,000 jobs.  Retail trade also held steady (-400 jobs).  Education and health services added 32,000 jobs. 

Construction saw continued large declines, at -64,000, with most of that in nonresidential.  The federal government added 7,000, state governments added 6,000, and local governments saw big declines at -31,000.  

The $15 billion jobs bill passed by the Senate and the House is, unfortunately, about 30 times too small. The bill, which would give employers tax breaks for new hires, is likely to create only a couple of hundred thousand jobs, while the hole that this downturn has torn in the labor market is now at 11.1 million jobs.  If Congress doesn’t act quickly and at a sufficient scale, we will see crippling rates of unemployment for years. 

— Research assistance provided by Kathryn Edwards and Andrew Green.

Methodology: The Jobs Gap

The jobs gap is a measure of the number of payroll jobs needed to return to the pre-recession rate of unemployment (while holding the pre-recession labor force participation rate constant, meaning no erosion in the relative size of the labor force).

Calculating the size of the current jobs gap
The gap is the number of jobs lost since the start of the recession (December 2007) plus the number of jobs that would have been needed to keep up with population growth over this period. The working-age population has grown 2.0% (0.9% annually) since the start of the recession, according to the Bureau of Labor Statistics’ household survey. Because there tend to be large discontinuities in the population data each January due to the fact that the January data are adjusted to reflect updates in the U.S. Census Bureau population controls, only January population data were used, and other months’ population data were extrapolated.&n
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Calculating how many jobs are needed every month to close the gap in three years
We assume that the population will continue to grow at the same annual rate (0.9%) it grew from January 2009 to January 2010. How many jobs are needed each month to close the gap by February 2013 is the difference between February 2010 payroll employment and what payroll employment in February 2013 would be if it had grown at the same rate as the working-age population from December 2007 to February 2010 and continues to grow at a 0.9% annual rate until February 2013, divided by the number of months (36).


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