Economic Indicators | Jobs and Unemployment

Labor market in full retreat

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This morning’s release of the June 2011 Employment Situation report by the Bureau of Labor Statistics showed a labor market in retreat.  Virtually every single measure was weak:  only 18,000 payroll jobs were added, nominal wages fell, unemployment was up in almost all age groups, more than 250,000 workers dropped out of the labor force altogether, and the public sector continued to bleed jobs.  Furthermore, a downward revision to last month’s data means that this is the second month in a row with job growth at 25,000 or less.  This is a remarkable, across-the-board backslide. 

Of particular concern is that measures we look to for signs of future growth – average hours and temporary help employment – both declined.  Average hours declined by one-tenth of an hour to 34.3, and temporary help lost 12,000 jobs, its third straight month of declines.   Somewhat ironically, this report marks the two-year anniversary of the “official” end of the Great Recession (June 2009) and it is the weakest report since the recovery began.  The unemployment rate increased to 9.2% in June 2011, and has been at 8.8% or above for the entire recovery thus far.   By comparison, the highest the unemployment rate ever reached in the two recessions prior to the Great Recession was 7.8% (for one month, June 1992). 

One of the most useful measures in capturing the broad nature of the recovery so far is the employment-to-population ratio, which is simply the share of the working-age population that has a job. This measure declined in June to 58.2%, matching its lowest point of the downturn so far.  As the accompanying chart shows, from the start of the recession in December 2007, through the 18 months of the recession itself, passed the official end of the recession in the summer of 2009 and through the end of 2009, the labor market continued to deteriorate significantly.   At the end of 2009, the labor market stopped its decline, but since then it has simply held steady.  (The recent EPI papers Ten Facts About the Recovery and Historically Deep Job Loss, but not an Unusual Recovery go into further depth in assessing the recovery so far.)

Long-term unemployment still near record high

The share of unemployed workers who have been unemployed for more than six months  was one thing that improved in June, from 45.1% to 44.4%.  However, that improvement was due entirely to a large influx of newer unemployed workers, not a decline in the long-term unemployed.  The number of workers who have been unemployed for more than six months increased by 89,000 to 6.3 million.    

Earnings and Industry breakdowns

With persistent high unemployment, wage growth is extremely low.  Average hourly wages were relatively flat in June (down by 1 cent), and have grown at a 1.8% annualized rate over the last three months and 1.9% over the last year, far below the growth rate in the period before the recession started.   With the decline in average hours and the lack of hourly wage growth, weekly earnings dropped by an annualized rate of 3.9% in June.

No sectors showed robust growth.  The public sector again displayed the ongoing drag of state and local budget problems, with state government employment losing 7,000 jobs and local government employment dropping by 18,000.  Since the end of the recession two years ago, the public sector has shed nearly half a million jobs, while the private sector has added one million jobs.  In other words, nearly 50% of the private sector jobs gains in this recovery have been canceled out by job losses in the public sector. 

The private sector added 57,000 jobs in June. Of these gains, 53,000 were in private service-providing industries and 4,000 were in goods-producing industries. Manufacturing gained just 6,000 jobs, while construction dropped 9,000 in June.  Temporary help services jobs dropped by 12,000, the third straight month of declines, not a promising sign for future hiring.  Leisure and hospitality was one bright spot, adding 34,000, though some of that was likely positive rebound from an uncharacteristic drop in May.  Employment in retail trade increased by just 5,000 in June, and some of that also may have been positive rebound after a surprising drop of 4,000 in May.  Financial services shed 15,000 jobs after adding 7,000 on average in the prior three months.  Health care added 14,000 jobs, a drop from the 27,000 jobs it added, on average, in the prior three months. 

The labor force and unemployment

The labor force participation rate declined to 64.1% in June, a new low for the downturn, as 272,000 workers dropped out of the labor force.  The labor force is 1.3 million workers smaller than it was at the end of the recession, although the working-age population has continued to grow in that time.  Consequently, the proportion of the population that is in the labor force is now 1.6 percentage points below where it was when the recession ended in June 2009. If the labor force participation rate had held steady over the last two years, there would be roughly 3.9 million more workers in the labor force right now.  Instead, they are on the sidelines. If these workers were in the labor force and were counted among the unemployed, the unemployment rate would be 11.4% right now instead of 9.2%. 

Underemployment

The underemployment rate (i.e., the U-6 measure of labor underutilization) is a more comprehensive measure of labor market slack than the unemployment rate because it includes not just the officially unemployed but also jobless workers who have given up looking for work and people who want full-time jobs but have had to settle for part-time work. This measure increased in June from 15.8% to 16.2%, due in large part to a nearly half-a-million increase in the number of “marginally attached” workers (workers who want a job, are available to work, but have stopped actively seeking work). In June there were a total of 25.3 million workers who were either unemployed or underemployed.

Demographic breakdowns

All major groups of workers have experienced substantial increases in unemployment over the Great Recession and its aftermath. However, some segments have gotten hit particularly hard: young workers, workers with lower levels of schooling, racial and ethnic minorities, men, and workers with disabilities. 

  • In June, unemployment was 17.3% among workers age 16–24, 8.2% among workers age 25–54, and 7% among workers age 55+ (up 5.6, 4.1, and 3.8 percentage points, respectively, since the start of the recession in December 2007).
  • Among workers younger than age 25 who are not enrolled in school, unemployment over the last year averaged 21.5% for those with a high school degree, and 9.6% for those with a college degree (reflecting increases of 9.5 and 4.2 percentage points, respectively, since 2007). 
  • Among workers age 25 or older, unemployment in June was 10% for those with a high school education and 4.4% for those with a college degree (up 5.3 and 2.3 percentage points, respectively, since the start of the recession). 
  • Unemployment in June was 16.2% for African American workers, 11.6% for Hispanic workers, and 8.1% for non-Hispanic white workers (up 7.2, 5.3, and 3.7 percentage points, respectively, since the start of the recession).
  • Unemployment was 9.7% for men, compared with 8.6% for women (up 4.6 and 3.7 percentage points, respectively, since the start of the recession).
  • Workers with a disability had an unemployment rate of 16.9% in June, compared with 9.0% for workers without a disability (up 7.6 and 3.4 percentage points, respectively, since June 2008). (Data on labor market outcomes by disability status are not seasonally adjusted and are only available back to June 2008.)

Conclusion

The labor market is currently 7 million payroll jobs below where it was at the official start of the recession three and a half years ago, and this number hugely understates the size of the gap in the labor market by failing to take into account the fact that simply keeping up with the growth in the working-age population would have required the addition of 4.1 million jobs since the recession started in December 2007. This means the labor market is now 11.1 million jobs below the level needed to restore the prerecession unemployment rate (5.0% in December 2007, the official start of the recession).   It has been three and a half years since the start of the recession in December 2007.  To get back to the pre-recession unemployment rate by December 2014, another three and a half years from now, we would need to add more than 350,000 jobs every single month between now and then.   We added only 43,000 jobs in the last two months combined.

Given this situation, it must be our top priority to do everything we can to stimulate demand and generate jobs, including providing fiscal relief to states; expanding the safety net (which, by getting money into the hands of people who will spend it, stimulates demand and generates jobs); approving additional spending on infrastructure; implementing direct job creation programs in particularly hard-hit communities; supporting work-sharing to avoid layoffs; having the Federal Reserve do more quantitative easing and/or target a somewhat higher inflation rate (e.g., 3-4%) to both reduce real interest rates and erode debt; and lowering the price of the dollar to boost net exports.  The president and Congressional leaders need to stop talking about deficit reduction and start talking about job creation.  

—Kathryn Edwards, Nicholas Finio, and Hilary Wething provided research assistance. 


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