Commentary | Jobs and Unemployment

On Labor Day, jobs crisis persists

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Monday September 6 will mark the third straight Labor Day that the country has been mired in an unemployment crisis. This year, the Labor Department kicked off the long holiday weekend with a new report that wasn’t as bleak as expected: the private sector added 67,000  jobs during the month of August.  In fact, while the country was still losing jobs a year ago, it has added jobs to the payroll for the past eight months.

But for the typical worker, this is not cause to celebrate. Far too many Americans cannot find work: The nationwide unemployment rate remains just short of double digits. The August 2010 unemployment rate of 9.6% is barely changed from the 9.7% rate this time one year ago, and it actually rose from 9.5% in July.

This persistently high unemployment rate even as job growth slowly resumes speaks to the depth of the jobs hole resulting from the Great Recession and the tepid nature of the recovery.  The United States needs to create about 100,000 new jobs each month just to keep up with population growth, and many more than that to see unemployment rates fall substantially. While Recovery Act investments succeeded in slowing the pace of job loss and moving the job market in the right direction, job creation is now moving at a pace that EPI Economist Heidi Shierholz recently described as “excruciatingly slow.”

And it’s not just America’s 14.9 million unemployed and 26.1 million underemployed workers who are feeling the pain. For decades, wage growth has been falling far short of gains in productivity and in recent years the gap has widened, making it difficult even for working Americans to prosper. Earlier this week, EPI published the paper Recession Hits Workers’ Paychecks, showing that wages are growing at half the rate at which they expanded in the period before the start of the recession in late 2007.

This latest trend of slower wage growth compounds a longstanding problem of workers failing to enjoy the fruits of their labors. Even during the last business expansion, which ran from 2002 until the start of the recession in late 2007, productivity grew but hourly compensation fell for both high school and college-educated workers. In fact, this EPI report shows that workers – including those with college degrees – earned less in 2009 than they did in 2000, when adjusted for inflation.

Trends of persistently high unemployment and slow wage growth stand in contrast to other segments of the economy such as corporate profits. Over the summer EPI President Lawrence Mishel compared the change in corporate profits since the start of the recession to the change in the labor market. He found that corporate profits had fully recovered while the labor market remained weak. By the first quarter of 2010, corporate profits were 5.7% higher than in the final quarter of 2007, but the total number of jobs had declined by 5.9% over the same period.

While the official unemployment rate is often used to sum up the health of the labor market, unemployment today would be higher were it not for a large number of workers who have either dropped out of the workforce or not entered it during the recession. Shierholz notes that although unemployment has fallen from its recent peak of 10.1% last October, that does not mean that a larger share of the population is working, but rather reflects the fact that 3.5 million workers are missing from the labor force.

Other troubling signs this Labor Day include the large number of long-term unemployed. Forty-two percent of unemployed workers have been seeking work for more than six months; 21.9% for more than a year. And several segments of the working population are seeing staggering rates of unemployment that make the nationwide rate look mild. The unemployment rate is 16.3% for black workers, 12% for Hispanic workers, and 13.8% for those with less than a high school degree. The share of youth age 16 to 24 who are neither employed nor enrolled in school is 17.9%.

And while Labor Day often calls to mind the sort of well-paying jobs in manufacturing and construction that were once the backbone of the nation’s economy, the United States has lost close to 15% of its manufacturing jobs and more than 25% of all construction jobs since the start of the recession. By contrast, many of the fastest-growing occupations today pay close to minimum wage.

For more detailed data on unemployment by demographic breakdown, consult EPI’s new Labor Day Fact Sheet as well as our EconomyTrack Web site.

See more work by Andrea Orr