September 5, 2008
Payrolls contract for eighth month in a row
The unemployment rate jumped to 6.1% last month, the highest jobless rate since September 2003, and payrolls fell by 84,000 jobs, the eighth month in row of consecutive declines, according to today’s report from the Bureau of Labor Statistics. In every period since 1948 when payrolls have declined this consistently, the economy has been in an official recession.
Both rising unemployment and declining payrolls show some signs of acceleration. Revisions to June and July subtracted another 58,000 from payrolls, such that over the past three months, the average job loss has been 81,000, compared to 67,000 over the prior three months. Since April, the jobless rate is up by 1.1 percentage points, from 5.0% to 6.1%, the largest four-month jump since 1981. Since unemployment bottomed out in March of last year, over 2 million have joined the jobless rolls.
Since January, payrolls are down by 605,000, and private-sector payrolls are down by 772,000 since November 2007 (their prior peak). Since government employment is less sensitive to the business cycle, often adding jobs while other industries are shedding workers, private-sector losses are more indicative of the extent of weakness in the job market.
Notably, the jump in unemployment occurred exclusively among adults, mostly concentrated among persons 25 years and over (teenage unemployment fell slightly in August). The increases for these adults occurred in every education group. Even college graduates had a more difficult time finding work in August, as their jobless rate rose from 2.4% to 2.7%, the highest college unemployment rate since August 2004. At the other end of the educational spectrum, the jobless rate for adults with less than a high school degree jumped to 9.6%, their highest rate since May 1996.
At 10.6%, African American unemployment hit double-digits last month, up from 9.7% the month before. The rate jump for blacks last month was exclusively among women, whose unemployment increased from 8.3% to 10.0%. Hispanic unemployment was also up more than the average, from 7.4% in July to 8.0% in August. (For more information about this month’s job data for African Americans and Hispanics, click here.)
Other signs of deepening weakness in the job market include the underemployment rate of 10.7% in August and the decline in the employment rate, from 62.4% to 62.1%. Underemployment includes part-timers who would prefer full-time jobs, and while this group did not grow in August, there are 5.7 million workers in this category, a recessionary level. The decline in the employment rate is a clear recessionary signal as well, and was driven last month by large job losses in the household survey. Taken together, these indicators show that employers are responding to weak consumer demand both by cutting workers and cutting hours.
Job losses were widespread across industries, with health care and government, once again, the only exceptions to the negative trends. Despite significant improvement in our trade balance, manufacturing losses continue to mount, down 61,000 jobs last month, mostly in durable manufacturing (-55,000). In other words, our improving net exports have not shown up as factory jobs. Given sharply declining car sales, employment in the auto sector was especially hard hit last month, down 39,000, the largest monthly loss (outside of a strike) on record going back to 1990.
Given the weakness in job creation, large numbers of job seekers are stuck in unemployment. The number of those who have been jobless for more than six months increased by over half a million over the last year, including 160,000 from July to August. In August, almost one in five unemployed workers (19.5%) had been unemployed for more than six months, the highest level in over three years.
Wage growth improved slightly in August though it still likely lags inflation. Hourly wages grew 3.6% compared to a year ago, a bit ahead of the comparable measure for July of 3.4%. Given the decline in average weekly hours over the past year, weekly earnings rose more slowly than the hourly rate: 3.3%. The most recent inflation reading is for July, when prices rose 5.6% over the year. Falling gas prices should bring this measure down in August, but the buying power of workers’ paychecks will still continue to fall.
Real gross domestic product rose 3.3% in the second quarter, boosted by both exports and the stimulus checks. This latter source of stimulus is over, and as noted, net exports have yet to show up in the jobs numbers. In fact, today’s employment report confirms that the improvement in overall growth is nowhere to be seen in the job market. Given ongoing weaknesses in the economy, including the housing and banking sectors, coming quarters of growth are expected to revert back to the below-trend pattern that persisted since the last quarter of 2007.
The engine of job growth is not merely stalled, it is solidly operating in reverse, and the job market’s deterioration in August suggests these problems are deepening. There is thus a strong rationale for a second stimulus package, one directly targeted at job creation.
In an additional analysis, EPI shows that the recent extensions in Unemployment Insurance have not contributed to the increase in the unemployment rate.
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The Economic Policy Institute JOBS PICTURE is published each month upon release of the Bureau of Labor Statistics’ employment report.
EPI offers same-day analysis of income, price, employment, and other economic data released by U.S. government agencies. For more information, contact EPI at 202-775-8810, or visit us on the Web at www.EPI.org.