August 1, 2008
Job market recession persists
Jobs declined for the seventh month in a row in July, down 51,000, for a total of 463,000 jobs lost so far this year, according to today’s report from the Bureau of Labor Statistics. The unemployment rate rose from 5.5% in June to 5.7% in July, its highest rate since March 2004 and a full point over its year-ago level. Over the past year, 1.6 million persons have been added to the jobless rolls. Underemployment, a more comprehensive measure of the extent of labor market weakness, rose to 10.3%, its highest level since 2003 and two points above its July 2007 level.
On average this year, payrolls have contracted by 66,000 per month. Job loss in the private sector has occurred more quickly, however, dropping an average of 83,000 jobs a month since it peaked in November 2007. Private sector payrolls are down 665,000 since then, including the loss of 76,000 last month. Since government employment is less sensitive to the business cycle, the private sector losses are more indicative of the full extent of labor market weakness.
This persistent and deepening slack in the job market, in tandem with accelerated inflation, is leading to significant real wage and benefit losses for most workers. Average weekly hours slipped slightly last month to 33.6 hours per week, the lowest level since November 2004. This put downward pressure on weekly earnings, which rose 2.8%, before inflation in July, the same rate as the previous month and the slowest pace of weekly earnings since September 2005. With inflation running between 4-5%, the buying power of weekly paychecks is dropping sharply.
In a related release yesterday, the BLS reported that the Employer Cost Index–a comprehensive measure of average wages and benefits–fell 1.8% in real terms in June 2008 compared to June 2007. That is the largest real decline in this data series’ history (dating back to the early 1980s).
Along with the decline in weekly hours worked, another important sign of the extent to which our current workforce is underutilized is the increase in part-time workers who would prefer full-time jobs. In July, there were 5.7 million part-timers in this category, 1.4 million above last year’s level and the highest level since the BLS settled on a way of measuring this condition in 1994. Since these involuntary part-timers are included in the underemployment rate noted above, they are partly responsible for its spike last month.
Unemployment jumped most sharply for teenagers last month, up 2.2 points to 20.3%. However, rates jumped for other groups as well. The jobless rate for “prime-age”� men (age 25-54) was up 0.3 points, and at 4.9% it is now 1.2 points higher than its year-ago level. The rate for African American adult men jumped from 9.3% in June to 10.0% last month, well above the 7.6% for this group in July 2007. The share of the long-term unemployment–those jobless for at least six months–jumped from 18.4% in June to 19.1% last month, underscoring the difficulty of the unemployed finding jobs in a contracting labor market. The recent extension of unemployment insurance benefits should be helpful in this regard.
Job losses were again pervasive across industries, with almost 60%, shedding jobs. Factories continued to shed workers, by 35,000 in July, for a loss of 383,000 over the last year. However, there was a tentative sign that increased exports may be offsetting some losses. Over the past three months, durable manufacturing jobs are down an average of 16,000 per month, compared to 37,000 a month over the prior three-month period.
Job losses also continued in construction, which was down 22,000 last month, with continued losses in both residential and non-residential building. Office jobs (professional and business services) fell overall by 24,000 jobs, driven by a 29,000 decline in temporary help services. Employers have been aggressively shedding temp workers, down 189,000 this year–a clear example of how workers in this bellwether sector often serve as a buffer against changes in underlying demand for the goods and services their firms produce.
Health care continues to reliably buck the negative employment trend, adding 32,900 jobs last month and 368,100 jobs over the past year. Government–which as noted, is less cyclically sensitive than the private sector–added 25,000 jobs last month. Thus far this year, while private payrolls have been contracting, government has expanded by 188,000, with most of the gains coming at the local level.
The combination of fewer jobs and diminished hours per week is leading total hours in the economy to decline fairly sharply, down 0.7% over the past year, an indicator of weaker macroeconomic times ahead. If working families cannot find the jobs and hours they need, incomes are likely to fall, driving consumption–70% of the economy–down as well. In this regard, policy makers need to actively plan for a second stimulus package to help strapped families and offset the headwinds holding the economy, and particularly the job market, back.
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The Economic Policy Institute JOBS PICTURE is published each month upon release of the Bureau of Labor Statistics’ employment report.
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