Economic Indicators | Jobs and Unemployment

Positive job growth, but not enough to reduce unemployment rate

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Jobs Picture for April 2, 2010

by Heidi Shierholz with research assistance from Kathryn Edwards and Andrew Green

This morning’s release of the Bureau of Labor Statistics employment report showed 162,000 payroll jobs gained in March, the largest jump in three years. However, of these, 48,000 were directly created by the federal government to assist with the 2010 Decennial Census. Excluding Census hiring, state and local government shed 9,000 jobs, while the private sector added 123,000 jobs. Some of these gains were likely an upward correction to the winter-storm-dampened February payrolls, but the trend since January is positive, with the private sector adding an average of 65,500 jobs per month over the last two months. However, as nearly 400,000 workers entered or re-entered the labor market in March, the increase in payroll jobs was not enough to move the dial on unemployment, which held steady at 9.7%.

It is important to note that for the next few months, Census hiring will likely be buffeting around month-to-month employment changes, as the number of temporary Census jobs showing up in payrolls may peak at over 600,000 in May, and then decline to near zero by the fall.

While the unemployment rate held steady at 9.7% in March, the long-term unemployment situation deteriorated. In March, an additional 414,000 unemployed workers crossed the six-months-unemployed threshold, so that now there 6.5 million workers who have been unemployed for longer than six months. The average unemployment spell was 31.2 weeks, the median unemployment spell was 20 weeks, and 44.1% of all unemployed workers had been unemployed for over six months.

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) also rose, from 16.8% to 16.9%, as the number of involuntary part-timers increased by 263,000 workers. However, the number of “marginally attached” workers — jobless workers who have given up looking for work, declined by 209,000, likely because many marginally attached workers entered or re-entered the labor force, which increased by 398,000 in March. In March, there were 2.3 million marginally attached workers, 9.1 million involuntary part-timers, and 15.0 million unemployed workers in the United States, for a total of 26.4 million workers who are either unemployed or underemployed.

Since the start of the recession in December 2007, the labor market has shed 8.2 million payroll jobs. This number, however, understates the size of the gap in the labor market by failing to take into account the fact that simply to keep up with population growth, the labor market should have added around 2.8 million jobs since December 2007. This means the labor market is now roughly 11 million jobs below what would restore the pre-recession unemployment rate (which was 5.0% in December 2007). To get us back to the lower unemployment rate that existed prior to the 2001 recession (4.3% in March 2001), the U.S. economy is now nearly 17 million jobs short.

Furthermore, thesecalculations understate slack in the labor market by failing 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 March, it was 34.0 hours. This may at first seem like a small amount, but when multiplied across the labor market, the effect is nontrivial—the decline in the total number of hours worked in the private sector since the start of the recession that is due to reduced hours alone (i.e., not job loss) is equivalent to 2.2 million jobs.

The length of the average workweek increased slightly in March, from 33.9 to 34.0 hours, but that was likely a correction to winter-storm-dampened February hours — in January, the average workweek was also 34.0. Average hours have increased from their low of 33.7 last fall, but are making very slow progress. Improvement in average hours would be a good sign, as employers will likely restore the hours of their existing workforce before they hire new workers.

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 March, unemployment was 18.8% among workers age 16-24, 8.8% among workers age 25-54, and 6.9% among workers age 55+ (increases of 7.0, 4.7, and 3.7 percentage points, respectively, since the start of the recession).

  • Unemployment was 16.5% among black workers, 12.6% among Hispanic workers, and 8.8% among white workers (increases of 7.5, 6.3, 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 10.8% for high school educated workers and 4.9% for those with a college degree (increases of 6.1 and 2.8 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 1.6% annualized rate over the last three months. With inflation currently at around 1.5%, this means real wages are basically flat over this period. However, nominal hourly wages actually declined (by two cents) in March. After falling faster than average hourly wage growth for the first year and a half of the recession, average weekly earnings growth has seen some improvements since last summer as average hours have improved slightly. Average weekly earnings grew at a 4.0% annualized rate over the last three months.

Temporary help services added 40,200 jobs, the sixth straight month of healthy gains. This is good news because this sector tends to lead broader recoveries. This report provided more evidence that manufacturing has turned the corner, adding 17,000 jobs, its third straight month of gains. Manufacturing has added 45,000 since December, with durable goods manufacturing adding 50,000 and nondurable goods manufacturing losing 5,000 in that period. Retail trade added 14,900 jobs in March, while health care added 26,800.

Construction saw an increase of 15,000, but that was likely a correction from weather-related declines in February. Since January, construction has declined by 44,000. Not including census hiring, federal government hiring was unchanged, state governments lost 5,000, and local governments lost 4,000.

Three years ago, in March 2007, the unemployment rate was 4.4%, while last month it was nearly twice that, at 9.7%. The crater that’s been blown in the labor market is enormous, and this morning’s report shows that while the private sector is now adding jobs, we need much more robust job growth over a sustained period of time to significantly reduce unemployment, especially since state and local governments are now shedding jobs. This morning’s report shows that, while things are clearly improving, the private sector is still not positioned to create sufficient numbers of jobs.

See related work on Wages Incomes and Wealth

See more work by Heidi Shierholz