Jobs Picture, September 4, 2009
Heidi Shierholz
September 4, 2009

Pace of job loss slows, but unemployed not finding work

by Heidi Shierholz

This morning, the Bureau of Labor Statistics released the employment situation report for August, which is the 20th month of the economic downturn.  The report showed an additional 216,000 jobs lost in August for a total of 6.9 million jobs lost this recession. 

The good news is that the American Recovery and Reinvestment Act (ARRA) is providing a significant boost to the labor market.  Over the last three months, the labor market has shed an average of 318,000 jobs per month.  By comparison, in the first quarter of this year, the labor market shed an average of nearly 700,000 jobs per month.  The ARRA is likely saving or creating between 200,000 and 250,000 jobs a month, for a total of around 1.2 million saved or created since its implementation.  In other words, without the ARRA, losses in August would likely have been double what they actually were, and the total jobs lost over the course of the recession would be over 8 million instead of 6.9 million. 

After a slight dip in July due to an unusually large number of workers dropping out of the labor force, unemployment reestablished its steady upward climb in August, rising from 9.4% to 9.7%.  Unemployment has more than doubled since its pre-recession low of 4.4% in March 2007, and has nearly doubled from 4.9% at the start of the recession in December 2007.  While the unemployment rate has not reached its post-WWII peak of 10.8% at the end of 1982, the increase in unemployment over this recession — 4.8 percentage points — has far surpassed the overall increase of 3.6 percentage points in the recession of 1981. 

Furthermore, this recession continues to shatter all records related to length of unemployment spells.  Currently, 5 million workers have been jobless for over six months.  The figure below shows the share of the labor force that has been unemployed for over half a year.  Currently, 3.2% of the labor force has been unemployed for over six months — far surpassing the previous peak of 2.6% set in June of 1983.   Currently one-third of this country’s 14.9 million unemployed workers have been unable to find work for over half a year.  Although the employment data released today clearly show that the pace of layoffs is slowing, these unemployment data also show equally clearly that unemployed workers are still not finding jobs.

Also worth noting is that the official unemployment count understates the slack in the labor market by counting neither those who want a job but have given up looking for work (“marginally attached”), nor workers who are working but can’t get the full-time hours they want (“involuntary part-time workers”).  There are currently 14.9 million unemployed workers in the United States, but if the marginally attached and involuntary part-time workers are included, the number swells to 26.4 million.  Currently one in six U.S. workers (16.8%) is either un- or underemployed.

While all major demographic groups have experienced large increases over the course of the recession, some groups are harder hit by unemployment, namely racial and ethnic minorities, men, workers with lower levels of schooling, and younger workers. 

• In August, unemployment was 15.1% among black workers, 13.0% among Hispanic workers, and 8.9% among white workers (increases of 6.2, 6.8, and 4.5 percentage points, respectively, since the start of the recession).

• Unemployment was 10.9% for men, compared to 8.2% for women (increases of 5.9 and 3.4 percentage points since the start of the recession).

• Unemployment reached 9.7% for high school educated workers, and 4.7% for those with a college degree (increases of 5.1 and 2.6 percentage points, respectively, since the start of the recession).

• Unemployment is 18.2% among workers age 16-24, 8.7% for 25-54 year olds, and 6.8% for those 55 and over (up 6.6, 4.7, and 3.7 percentage points, respectively, since the start of the recession).

Hourly wage growth, which remained relatively strong for the first year of the recession, has collapsed in the last eight months (see EPI’s report The Recession’s Hidden Costs for a more in-depth analysis).  Growth in the hourly wages of production workers dropped from 3.9% during the first year of the recession (December 2007-December 2008) to a 2.6% annualized growth rate in the last three months.  Average weekly earnings have seen a modest improvement, however, as cuts in hours have slowed, growing at a 2.6% annualized rate in the last three months after growing just 2.4% during the first year of the recession. 

As mentioned above, 6.9 million jobs have been lost since the start of the recession.  This number, however, understates the magnitude of the hole in the labor market by failing to take into account the fact that the population continues to grow.  To keep up with population growth, the economy needs to add approximately 127,000 jobs every month, which translates into 2.5 million jobs over the 20 months of the recession. This means the labor market is currently 9.4 million jobs below where it would need to be to maintain a pre-recession unemployment rate. Furthermore, the economy now has fewer jobs than it had in March 2000, even though the labor force has grown by 12.1 million workers since then.

Job losses are moderating in most industries.  Construction jobs declined by 65,000 in August, for a recession-to-date total of 1.4 million jobs lost (19.0% of employment in that sector). The August contraction was, however, significantly smaller than the average monthly losses of 100,900 in the previous nine months.  Manufacturing jobs declined by 63,000 in August, for a total drop since December 2007 of 2.0 million jobs, 14.6% of that sector’s employment.  Here, too, the August decline was much smaller than the average monthly loss of 152,100 jobs during the previous nine months. Retail trade lost 9,600 jobs in August, also an improvement from the average monthly loss of 43,200 in the previous nine months.  Losses continued in the professional and business services sector, which shed 22,000 jobs; but here, too, the August loss was much smaller than the 110,000 average monthly loss of the prior nine months.  

The federal government lost 5,000 jobs in August, due to a loss of 8,500 U.S. Postal Service workers.  State governments lost 5,000 and local governments lost 8,000, as budget deficits at the state and local level forced additional cuts. 

The August employment report shows that the labor market is continuing to deteriorate, though, thanks to the ARRA, at a much slower rate than earlier in the year.  Unemployment will likely pass 10% by the end of the year and remain elevated for years to come, and unemployment spells for those who have lost their jobs will continue to lengthen from their already record-breaking levels.  In light of this, policy interventions are needed to provide relief and generate jobs.  One of the first orders of business when Congress reconvenes next week should  be an immediate extension of federal unemployment benefits for the estimated half a million workers who will exhaust their benefits by the end of September.

— Research assistance from Kathryn Edwards and Andrew Green.