Economic Indicators | Jobs and Unemployment

The labor market is treading water

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The June 2012 employment report from the Bureau of Labor Statistics released this morning showed 80,000 jobs were added last month. This pace of job growth means two things: We are not in—nor are we slipping into—another recession, but neither are we getting the kind of job growth that will bring down the unemployment rate. In other words, the labor market is treading water. This would be perfectly fine if we were at full employment, but with the unemployment rate now above 8 percent for 41 months straight, this is an ongoing, severe crisis for the American workforce.

Three years of recovery, during which more than 600,000 public-sector jobs were lost

Once again the public sector shed jobs, 4,000 in June. This drop was somewhat smaller than in recent months; over the prior three months, the public sector lost 16,300 jobs per month, on average. However, it continues the trend of unprecedented public-sector job loss in this recovery. Since the recovery officially began three years ago in June 2009, the country has lost 627,000 public-sector jobs—an enormous drag that did not weigh on earlier recoveries.

This EPI analysis compares this recovery with earlier recoveries. Among other things, it shows that 2.3 million total jobs have been lost in this recovery due to the loss of public-sector jobs, including jobs lost in the private sector through ripple effects.

May’s drop in hours is restored, wage growth improves but is still weak

The length of the average workweek increased one-tenth of an hour in June to 34.5 hours, reversing the drop in May. Average hours is close to its prerecession level of 34.6 hours.  Average hourly wages for all private-sector workers increased by 6 cents in June, an improvement over the prior three months. However, the high unemployment of the last four years has exerted strong downward pressure on wage growth; average hourly wages grew 2 percent over the last year, a substantial decline from the prerecession rate of wage growth.

MORE: Sort through updated graphs using data from today’s
report

Negative payback from warm winter weather likely still in play

As in the March–May numbers, there may still be some negative weather effects in the June data (i.e., payback for strong job growth during the unseasonably warm winter). Restaurants and bars, construction, and retail trade—all industries strongly affected by weather—all saw particularly weak job growth in June (15,100 in restaurants and bars, 2,000 in construction, and a loss of 5,400 in retail). Next month will provide a clearer indication of the underlying trends in these industries.

Temporary help services added 25,200 jobs in June. Temporary help services have now nearly regained their prerecession level of employment. Manufacturing added 11,000 jobs in June, all in durable goods. The growth in manufacturing was a decline from its average gain of 28,500 jobs over the prior six months. Health care added 13,000 jobs, also below its average monthly growth of 29,800 jobs in the prior six months.

Labor force participation held steady in June, remains near low of downturn

The labor force participation rate held steady in June at 63.8 percent, still near its low of the downturn and far below the 66.0 percent level of December 2007. This recent EPI analysis shows that roughly two-thirds of the decline in the labor force participation rate since the start of the recession is due to weak job prospects in the Great Recession and its aftermath.

If two-thirds of the workers who make up the drop in the labor force participation rate since the start of the recession were in the labor force, there would be 3.6 million more people in the labor force. If these 3.6 million “missing workers” were in the labor force and were unemployed, the unemployment rate would now be over 10 percent instead of 8.2 percent.

Long-term unemployment drops but remains high

The share of unemployed workers who have been unemployed for more than six months dropped somewhat in June to 41.9 percent, but is still not far off its record high of 45.5 percent in March 2011. By comparison, in 2007 the share averaged 17.5 percent. Because hiring is very weak, jobless workers continue to be unable to find work for long periods.

Demographic breakdowns

Unemployment in June was 8.4 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 year averaged 21.0 percent for those with a high school degree, and 8.3 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). While these numbers show that workers with higher levels of education have lower unemployment, workers at all levels of education have seen their unemployment rates roughly double since 2007, running counter to the notion that unemployment is high because employers are unable to find workers with the right skills.

Racial and ethnic minorities continue to be hit particularly hard by unemployment. Unemployment in June was 14.4 percent for African American workers, 11.0 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 8.0 percent.

Conclusion

Despite ongoing improvements, the labor market still has a deficit of close to 10 million jobs, and the lack of demand for workers means unemployment remains high, labor force participation is weak, and wage growth for people with jobs remains low. Further, as discussed above and in this EPI analysis, the labor market has faced an unprecedented loss of public-sector jobs in this recovery.

To reduce the ongoing loss of public-sector jobs (and the private-sector jobs that are subsequently lost due to the ripple effects of the public-sector losses), Congress should provide 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