Economic Indicators | Jobs and Unemployment

Miserably low job growth


 Press release

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This morning’s release of the Employment Situation report by the Bureau of Labor Statistics showed that 103,000 jobs were added in September.  That number, however, includes around 45,000 Verizon workers coming off the picket lines, so the net new jobs the economy created in September was actually around 58,000.  This level of growth is in line with the dismal average of the last five months, which was 72,000, and that was a slowdown from the average growth rate in the prior 14 months (123,000 from March 2010 to April 2011) that didn’t do much more than keep up with population increases.   This country has 14 million unemployed people, and the job growth rate has unmistakably slowed down since the spring. The unemployment rate is for the moment holding steady at 9.1 percent, but at the current rate of job creation, it will soon begin to rise again.

The Teacher Gap

In September, public-sector employment dropped by 34,000, with most of that  (-33,000) occurring in state and local governments.  Over the last three years, state and local government employment has dropped by 641,000, as state and local budgets have been squeezed as a result of the recession. With kids heading back to the classroom this fall, it’s worth considering how much of that drop has hit public schools.

Almost half (-278,000) of the decline in state and local government jobs was in local public  education, which is largely jobs in public K-12 education (and the majority of workers  in public K-12 education are teachers, but there are also teacher aides, librarians, guidance counselors, administrators, support staff, etc.). On the other hand, over the same period, public K-12 enrollment increased by 0.6 percent (using the actual and projected enrollment growth rates found in Table 1 here). Just to keep up with this growth in the student population, employment in local public education should have grown at roughly the same rate, which would have meant adding around 48,000 jobs. Putting these numbers together (i.e., what was lost plus what should have been added to keep up with the expanding student population) means that the total jobs gap in local public education as a result of the Great Recession and its aftermath is around 326,000 jobs.

This decline means not only larger class sizes, but also fewer teacher aides, fewer extra-curricular activities, and a narrower curriculum for our children. Furthermore, this number almost surely understates the real gap. Between 2008 to 2010, the number of children living in poverty increased by 2.3 million, and is likely even higher today. Increased child poverty increases the need for services provided through schools. Instead, public schools have fewer personnel and fewer resources to educate more students, and more students with greater needs.

Underemployment

The “underemployment rate” (the U-6 measure of labor underutilization) is the BLS’s most comprehensive measure of labor market slack: it includes not just the officially unemployed and the marginally attached (jobless workers who want a job and are available to work but have given up actively seeking work), but also people who want full-time jobs but have had to settle for part-time work. This measure increased in September from 16.2% to 16.5%, due to a very large increase of  444,000 “involuntary” part-time workers. In September there were a total of 25.8 million workers who were either unemployed or underemployed (14.0 million officially unemployed, 2.6 million marginally attached, and 9.3 million involuntary part-time workers). Racial and ethnic minorities have been particularly hard hit by underemployment.

Long-term unemployment

The share of unemployed workers who have been unemployed for more than six months increased to 44.6% in September, not far off its record high of 45.6% in the Spring of 2010. The number of workers who have been unemployed for more than six months increased by 208,000 to a total of 6.2 million in September.  The number of unemployed who had been jobless more than a year was 4.4 million in September (not seasonally adjusted), up from 4.3 million one year ago.  This is unsurprising given that there have been more than four unemployed workers per job opening since January 2009.

Labor force participation and the employment-to-population ratio

The labor force participation rate (LFPR) increased to 64.2% in September, back to where it was in the Spring.  September’s LFPR increase came from workers under 25 and over 54, while the LFPR of “prime age” workers (workers age 25-54) held steady.  Remarkably, the overall labor force has seen almost no net growth (+81,000) since the recession started, though the working-age population grew by over seven million in that time. There are currently 2.6 million “marginally attached” workers in this country.  If these workers were in the labor force and counted as unemployed, the unemployment rate would be 10.5% (the U-5 measure of labor underutilization) instead of 9.1%.

At a time like this, with the labor force not growing at a steady pace, arguably the cleanest measure for assessing labor market trends is the employment-to-population ratio, which is simply the share of the working-age population that has a job. This measure increased by one-tenth of a percentage point to 58.3% in September.  Again, the increase occurred among workers under 25 and over 54, with workers age 25-54 seeing a decline from 75% to 74.9%, near the low for the downturn of 74.7% in December 2009.

Earnings

Hourly wages increased by 4 cents in September.  In the last three months, wages have grown at a 1.9% annualized rate, and they have grown 1.9% over the last year. This remains far below the pre-recession growth rate, as persistent high unemployment has put strong downward pressure on wage growth. Average weekly wages growth has been similar, growing at a 1.9% annualized rate over the last three months and 2.1% over the last year.

Demographic breakdowns

Unemployment in September was 9.7% for those with only a high school education, and 4.2% for those with a college degree or more.  While workers with higher levels of education have lower unemployment rates, all education categories have seen their unemployment rates roughly double over the last four years, running counter to the notion that a key part of today’s unemployment is due to employers being unable to fill their demand for skilled workers.

Considering additional breakdowns by age, race/ethnicity, and gender, we find that all major groups of workers have experienced substantial increases in unemployment over the Great Recession and its aftermath.  However, young workers, racial and ethnic minorities, and men have been hit particularly hard.

  • In September, unemployment was 17.4% among workers age 16–24, 8.1% among workers age 25–54, and 6.7% among workers age 55 and older (up 5.7, 4.0, and 3.5 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 21.6 % for those with a high school degree, and 9.6% for those with a college degree (reflecting increases of 9.6 and 4.2 percentage points, respectively, since 2007).
  • Unemployment in September was 16.0% for African American workers, 11.3% for Hispanic workers, and 8.0% for white workers (up 7.0, 5.0, and 3.6 percentage points, respectively, since the start of the recession).
  • Unemployment was 9.4% for men, compared with 8.7% for women (up 4.3 and 3.8 percentage points, respectively, since the start of the recession).

Temporary help services and average hours

One point of relatively good news in the report was that employment in temporary help services increased by 19,000 in September, and there were upward revisions to the prior two months’ data.   The average growth rate in temporary help services in the third quarter was 18,000, compared an average decline of 4,000 in the second quarter.  Since hiring in temporary help services tends to be a signal of broader upcoming hiring patterns, the fact that temporary help is not declining is good news.  However, it remains below the average growth rate of 28,000 from the fourth quarter of 2009 through the first quarter of 2011.

Furthermore, it is important to note that employment in temporary help services remains far below where it was before the recession started.  One thing this underscores is that the lack of hiring right now indicates a lack of demand, not concern on the part of businesses about regulatory burdens.  If businesses needed workers to meet demand but were reluctant to hire because of some other reason, we would see a big flood into temporary help services, and that is not happening.  While the temporary help services sector has recouped a greater share of its losses than other private sector employment, its losses during the recession were much more severe.  Employment in temporary help services is now 10.3% below where it was in December 2007, while employment in other private-sector employment is now 5.3% below where it was in December 2007.

A similar logic applies to average hours.  The length of the average workweek increased in September back to its July value of to 34.3 hours.  However, average hours have dropped since the spring, when it was at 34.4, and have thus far made up just two-thirds of what they lost in the first 18 months of the downturn (the low point was 33.7 hours in June 2009).  Again, if demand was there but businesses didn’t want to hire for some other reason, we would see them strongly ramping up the hours of the workers they have.  As it is, there remains substantial room to meet unmet demand by increasing hours of existing workers; if private-sector employers were to simply restore the hours of their workers back to pre-recession levels, it would be equivalent to adding over 900,000 jobs at current average hours.

Conclusion

The U.S. is currently 6.6 million jobs below where it was when the recession started. But because the working-age population grows as the population expands, in the three years and nine months since the recession started we needed to have added around 4.5 million jobs to keep the unemployment rate from rising. Putting these numbers together means the current gap in the labor market is roughly 11.1 million jobs. To fill that gap in three years—by Fall 2014—while still keeping up with the growth in the working-age population—would require adding around 400,000 jobs every single month. To fill the gap in five years—by Fall 2016—would mean adding 280,000 jobs each month. By comparison, over the last three months, the economy added just 96,000 jobs per month on average.  At this rate, the unemployment rate will not come down.  More than two years into the official recovery, the United States has yet to produce anything close to the rate of job growth that will put its backlog of unemployed workers back to work before the end of the decade.  The key issue holding back job growth is a lack of demand, not regulatory uncertainty or anything else. (For policies that we can and should be pursuing to stimulate demand and generate jobs, see EPI’s Briefing Paper, Putting America Back to Work.)

— Research assistance by Nick Finio, Natalie Sabadish, and Hilary Wething


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