Economic Indicators | Jobs and Unemployment

Today’s jobs report is crystal-clear evidence that we’re in a slog


 Press release

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This morning’s jobs report from the Bureau of Labor Statistics showed 175,000 jobs were added in May. This rate of growth is right in line with the average growth rate of the last year (176,000) and is a perfect example of the ongoing slog in the labor market. At this pace, it will take more than six years to get back to the prerecession unemployment rate.

Our jobs deficit stands at 8.5 million jobs (taking into account both the number of jobs we are still down from before the recession began, plus the number of jobs we would have needed over this period just to keep pace with growth in the potential labor force). Thus, we need more than 300,000 jobs per month to get to full employment by May 2016, three years from now and six months before the next presidential election. At the job growth rate of the last year, we will still have a deficit of 4.6 million jobs in May 2016.

The unemployment rate held roughly steady in May (ticking up less than a tenth of a percentage point from 7.51 to 7.56 percent).

Unemployment remains elevated across the board

The table shows the current unemployment rate and the unemployment rate in May 2007, six years ago, along with the ratio of those two values, for various demographic and occupational groups. There is substantial variation in unemployment rates across groups, but it is worth noting that this is always the case; for example, it was true in 2007, before the recession began. A key message from this table is that the unemployment rate is between 1.6 and 2.0 times as high now as it was six years ago for all groups. Today’s sustained high unemployment relative to 2007 across all age, education, occupation, gender, and racial and ethnic groups underscores that the jobs crisis stems from a broad-based lack of demand. In particular, unemployment is not high because workers lack adequate education or skills; rather, a lack of demand for goods and services makes it unnecessary for employers to significantly ramp up hiring.

Table Table (continued)

Unemployment rates of various demographic groups, May 2007 and May 2013

May 2007 May 2013 Ratio
All 4.4 7.6 1.7
Male 4.6 7.9 1.7
Female 4.3 7.1 1.7
White 3.9 6.7 1.7
Black 8.3 13.5 1.6
Hispanic 5.7 9.1 1.6
Age 16–24 9.9 16.3 1.6
Age 25–54 3.6 6.4 1.8
Age 55+ 3.2 5.3 1.7
Workers age 25 and older
Less than high school 6.6 11.1 1.7
High school 4.4 7.4 1.7
Some college 3.4 6.5 1.9
Bachelor’s and advanced degree 2.0 3.8 1.9
Workers under age 25, not enrolled in further schooling
High school degree 11.6* 19.8* 1.7
Bachelor’s and advanced degree 5.1* 8.2* 1.6
Occupation
Management, professional, and related occupations 2.0* 3.9* 2.0
Service occupations 5.7* 9.0* 1.6
Sales and office occupations 4.3* 7.6* 1.7
Construction and extraction occupations 7.1* 13.8* 1.9
Installation, maintenance, and repair occupations 3.7* 5.9* 1.6
Production, transportation, and material moving occupations 5.7* 9.5* 1.7

* This is a 12-month average (prior June to given May). The monthly values for this series are not seasonally adjusted.

Source: Author’s analysis of the Current Population Survey public data series

Labor force participation still near low of the downturn

The labor force participation rate ticked up to 63.4 percent, just one-tenth of a percentage point above its low of the downturn and far below its prerecession rate of 66.0 percent in December 2007. This uptick shouldn’t be interpreted as an indication that job opportunities have improved enough to start consistently drawing missing workers—whose ranks are estimated at more than 4 million—back into the labor force. It is unlikely that workers who are out of the labor force due to weak job opportunities are going to join or rejoin the labor force in large numbers until job prospects are strong enough that they won’t face months of fruitless job search. Currently, the median (or typical) unemployed worker has been actively searching for a job for around four months (17.3 weeks).

Hours and wages

The length of the average workweek held steady in May at 34.5 hours, still slightly below its prerecession level. The very high unemployment of the last four years has exerted strong downward pressure on wage growth, since the existence of so many unemployed workers relative to job openings, combined with the lack of outside job opportunities for workers with jobs, means employers don’t have to pay substantial wage increases to get and keep the workers they need. Average hourly wages for all private-sector workers increased by 1 cent in May, and 2.0 percent over the last year. As this plot shows, this is a substantial decline from the prerecession rate of wage growth.

Public-sector losses continue to hamper the recovery

The public sector continues to shed jobs, losing 3,000 in May (-14,000 federal, -2,000 state, and +13,000 local). Since the recovery began in June 2009, the public sector has lost nearly three-quarters-of-a-million jobs (737,000). These losses are an enormous drain on the recovery.

Construction added 7,000 jobs in May, the second month in a row of disappointing growth after the average monthly gain of 27,700 in the six months before that. Another disappointment was manufacturing, which dropped for the third straight month, losing 8,000 jobs in May after losing a total of 13,000 in March and April. In the year prior to that, manufacturing had been adding around 10,000 jobs per month.

Job growth in low-wage sectors was relatively strong in May, which is typical when the unemployment rate is so high. Restaurants and bars increased by 38,100 jobs, slightly higher than its average growth of the prior three months, 34,300. Employment in the temporary help services industry increased by 25,600 in May, in line with its average growth of 24,500 over the prior three months. The share of total employment in temporary help services, 2.0 percent, is just slightly above its prerecession share (which was 1.9 percent in 2005, 2006, and 2007). Retail trade added 27,700 jobs in May, higher than its average growth of the prior three months, 14,300.

Health care added just 10,700 jobs in May, lower than its average increase of 23,300 over the prior three months.

— Research assistance provided by Nicholas Finio, Natalie Sabadish, and Nicholas Buffie.

See more work by Heidi Shierholz