Economic Indicators | Jobs and Unemployment

Zero job growth made worse by drop in weekly hours

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This morning’s release of the Employment Situation report by the Bureau of Labor Statistics showed there was no job growth in August.  Much attention is being paid to “zero job growth”, but the real news in today’s numbers is that job growth is worse than in recent months, and the nation continues to produce far fewer jobs than needed to meaningfully reduce the unemployment rate, which held steady at 9.1%.

Unrestored hours shows the main issue is lack of demand

The length of the average workweek declined in August to 34.2 hours.  Average hours have dropped in the last three months, have seen no net growth over the last year, and have thus far made up just over half of what they lost in the first 18 months of the downturn (the low point was 33.7 in June 2009). One thing this underscores is that the lack of hiring right now primarily indicates a lack of demand, and not an inability by businesses to find the right workers or because of uncertainty or concern about regulatory burdens.  If the lack of hiring was occurring for some reason other than a lack of demand, we would see businesses 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, that would be equivalent to adding over 1.2 million jobs at current average hours.

Demographic breakdowns

Unemployment in August was 9.6% for those with only a high school education, and 4.3% 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.  (For more on this, see page 13, and in particular Figure I, in the EPI Briefing Paper, Sustained High Joblessness Causes Lasting Damage.)

Considering additional breakdowns by age, race/ethnicity, gender, and disability status, we find that all major groups of workers have experienced substantial increases in unemployment over the Great Recession and its aftermath.

  • In August, unemployment was 17.7% among workers age 16–24, 8.1% among workers age 25–54, and 6.6% among workers age 55 and older (up 6.0, 4.0, and 3.4 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 21.5% for those with a high school degree, and 9.7% for those with a college degree (reflecting increases of 9.5 and 4.3 percentage points, respectively, since 2007).
  • Unemployment in August was 16.7% for African American workers, 11.3% for Hispanic workers, and 8.0% for non-Hispanic white workers (up 7.7, 5.0, and 3.6 percentage points, respectively, since the start of the recession).
  • Unemployment was 9.6% for men, compared with 8.5% for women (up 4.5 and 3.6 percentage points, respectively, since the start of the recession).
  • Workers with a disability had an unemployment rate of 16.1% in August, compared with 8.8% for workers without a disability (up 5.6 and 2.9 percentage points, respectively, since August 2008). (Data on labor market outcomes by disability status are not seasonally adjusted and are only available back to the summer of 2008.)

Earnings

Hourly wages declined by 3 cents in August, following July’s surprise gain of 11 cents.  In the last three months, wages have grown at a 1.2% 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. With the decline in both hours and hourly wages in August, average weekly wages also dropped last month, at a 4.9% annualized rate.

Underemployment and long-term unemployment

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 but also people who want full-time jobs but have had to settle for part-time work. This measure increased in August from 16.1% to 16.2%, due to a very large increase, 430,000, in the number of “involuntary” part-time workers. In August there were a total of 25.3 million workers who were either unemployed or underemployed. Racial and ethnic minorities have been particularly hard hit by underemployment.

The share of unemployed workers who have been unemployed for more than six months dropped to 42.9%, still 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 decreased by 151,000 to 6 million in August.  The number of unemployed who had been jobless more than a year was 4.5 million in August (not seasonally adjusted), up from 4.4 million one year ago.

Industry breakdowns

The labor market saw no payroll jobs growth in August, though after accounting for the Verizon worker strike (-45,000) and the end of the Minnesota government shutdown (+22,000), the underlying rate of growth was 23,000, still far before what is needed to reduce the unemployment rate.

Data for the public sector again reflected ongoing state and local budget problems.  State governments added 5,000 in August, but as mentioned above, the growth was entirely due to the end of the government shutdown in Minnesota.  Since June, state government employment is down by 12,000.  Local government employment dropped by 20,000 between July and August. State and local governments have shed 671,000 jobs since their peak in August 2008.

The private sector added 17,000 jobs in August, but would have added 62,000 if not for the Verizon worker strike, still the lowest rate of private-sector job growth since May 2010.  Manufacturing lost 3,000 jobs, a big drop after adding an average of 19,000 a month over the prior three months. Construction lost 5,000, after adding an average of 1,000 a month over the prior three months.

Temporary help services again saw weak growth in August (+5000 jobs), following four straight months of declines or very weak growth (the average growth rate of the prior four months was -3,000). The lack of strong growth in temporary help is not a promising sign for future hiring.   Employment in retail trade dropped by 8,000 in August, after increasing by 14,000 on average in the prior three months. Health care added 30,000 jobs, stronger growth than the 24,000 a month it added on average in the prior three months. Restaurants and bars also saw stronger growth, adding 9,000, after seeing no growth for the prior three months.

Labor force participation and employment-to-population ratio

The labor force participation rate increased by 0.1 percentage point to 64.0% in August, remaining near last month’s low for the downturn.  Remarkably, the labor force is smaller than it was before the recession started (by more than 300,000 workers), though the working-age population grew by over seven million in that time. There are currently 2.6 million “marginally attached” workers—workers who want a job, are available to work, but have given up actively seeking work.  If these workers were in the labor force and counted as unemployed, the unemployment rate would be 10.6% right now 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 0.1 percentage point to 58.2% in August, also just off its low of the downturn last month.

Conclusion

The U.S. is currently 6.9 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 eight months since the recession started we needed to have added around 4.3 million jobs to keep the unemployment rate from rising. Putting these numbers together means the current gap in the labor market is roughly 11.2 million jobs. To fill that gap in three years – by mid-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 mid-2016—would mean adding 280,000 jobs each month. By comparison, over the last three months, the economy added just 35,000 jobs, on average.

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.  As this report shows, the key issue holding back job growth is a lack of demand. 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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