Economic Indicators | Jobs and Unemployment

Jobs report offers no sign of light at end of tunnel

Jobs Picture for April 3rd, 2009

by Heidi Shierholz with research assistance from Kathryn Edwards

The March 2009 employment situation report, released this morning by the Bureau of Labor Statistics, showed that the labor market continued its free fall in March. Unemployment increased sharply from 8.1% to 8.5%, its highest level since 1983, and payroll employment declined by 663,000 jobs, an average of over 30,000 jobs lost every work day in March. This was the third steepest decline in 15 straight months of job loss. Since the start of the recession in December 2007, the economy has shed 5.1 million jobs, including over two million jobs lost in the last three months alone.

The addition of 694,000 workers to the jobless rolls in March means that there are now 13.1 million unemployed workers in this country—5.6 million more than at the start of the recession. That number, large as it is, actually understates labor market slack because it only counts jobless workers as being part of the labor force only if they are actively seeking work. Since October, the number of workers in the labor force has declined by 830,000. This trend suggests that the official unemployment rate is currently understating labor market weakness, at least to the extent that workers have dropped out of (or never entered) the labor force because they felt they would not be able to secure meaningful work given current labor market conditions. If those missing workers were counted as unemployed, the March unemployment rate would have been 9.0%.

The employment-to-population ratio—simply the percent of the working-age population that is employed—is an important measure to track during periods of changing labor force participation, since it sidesteps the labor force issue altogether. In December 2006, 63.4% of the working-age population was employed, its pre-recession peak. Since then, the employment-to-population ratio has declined 3.5 percentage points to its current level of 59.9%—the steepest decline during any recession since the Great Depression, exceeding the declines of 3.0 and 3.1 percentage points, respectively, for the periods from 1979 to 1983 and from 1953 to 1954. The chart below shows the employment-to-population ratio over the last 50 years.1 It should be noted that the employment rates of workers aged 55 and over have remained essentially flat during the current downturn, so the entire decline in the employment-to-population ratio has come from workers aged 16-54 (and not older workers retiring).


The underemployment rate (sometimes referred to as the U-6 measure of labor underutilitzation) is also a more comprehensive measure of labor market slack than the unemployment rate. The primary difference between the unemployment and underemployment rates is that the latter includes people working part time who want full-time jobs. This measure increased sharply from 14.8% in February to 15.6% in March. Now an estimated 24.4 million people—one in every six workers in this country—is either unemployed or underemployed. The number of involuntary part-time workers increased by 423,000 in March and by 4.4 million since the start of the recession.

Long-term unemployment—measured as the percent of the unemployed who have been jobless for six months or more—increased in March to 24.2%, so that currently nearly one out of four unemployed workers has been out of a job for at least half a year. This figure is unsurprising given that there are currently about 4 unemployed workers for every job opening, making it very difficult for unemployed workers to find a job.

While all major demographic groups have experienced large increases in unemployment since the start of the recession, there nevertheless remain significant differences in unemployment rates for different groups. In March, unemployment was 13.3% among black workers, 11.4% among Hispanics, and 7.9% among whites (increases of 4.4, 5.2, and 3.5 percentage points, respectively, since the start of the recession). By education category, we find that workers with lower levels of schooling face much higher unemployment rates. For those with a college degree, the unemployment rate is 4.3%, while those with only a high school diploma face an unemployment rate of 9.0% (up 2.2 and 4.4 percentage points since the start of the recession). Workers with less job experience are also particularly hard-hit in this economy—those age 16-24 face an unemployment rate of 16.3%; those age 25-54 face an unemployment rate of 7.6%; and those age 55 and over face an unemployment rate of 6.2% (up 4.7, 3.6, and 3.1 percentage points, respectively). Men have lost more ground than women—March unemployment was 9.5% for males and 7.5% for females (up 4.5 and 2.7 percentage points since the start of the recession).

Job losses are occurring throughout the economy—the diffusion index shows that 78% of industries experienced employment declines in March. Manufacturing and construction, however, still face the biggest losses. Manufacturing saw a decline of 161,000 jobs, for a total loss since December 2007 of 1.5 million jobs, representing 10.6% of that sector’s employment. Within manufacturing, fabricated metal products (down 27,700), machinery (down 27,000), and transportation equipment (down 25,900) saw the biggest declines in March. Construction saw 126,000 jobs disappear in March, for a total decline this recession of 1.0 million jobs, 14.0% of that sector’s employment.

The service sector is also experiencing declines—private services (that is, excluding government) were down 353,000 jobs in March, for a total decline since December 2007 of 2.8 million jobs, or 3.0%. Transportation and warehousing was down 34,000 jobs in March, with truck transportation experiencing the largest losses (14,900 jobs), as fewer goods were being shipped. Retail trade was down 47,800 in March and 675,000 since December 2007, representing 4.3% of the jobs in that sector. Within retail, large losses continued in motor vehicle and parts dealers (down 16,100). Wholesale trade was down 31,200 in March, with most of those losses (26,400) in durable goods.

The financial activities sector continued to shrink (down 43,000 jobs in March and 4.6% since December 2007), as did professional and business services (down 133,000 jobs in March for a cumulative 6.7% drop since December 2007). Within professional and business services, temporary help services have seen the steepest declines, down 71,700 jobs in March and 29.7% since the start of the recession. Architectural and engineering services have also declined, down 16,300 in March and 5.2% since the start of the recession.

Once again, health care added jobs (up 13,500 in March and 3.2% since the start of the recession). Government employment, however, declined by 5,000 in March. Federal government employment grew 7,000 in March (and 2% since the start of the recession), while state government employment declined by 3,000 in March (though is up 0.8% since the start of the recession). Local governments lost 9,000 jobs in March, but are up 0.5% since the start of the recession.

The index of aggregate weekly hours measures the total number of hours worked in the economy. Total hours is a more comprehensive measure than employment that captures both job loss and reductions in hours for workers who keep their jobs. This index is falling at a stunning pace, evidence of the extent of the economy’s contraction. It fell at an annual rate of 11.2% in March, and at an annual rate of 9.0% over the last six months.

Nominal (i.e., not inflation adjusted) hourly wages have risen at a rate of 3.4% ove
r the last year, meaning that with price indices showing minimal growth, workers who remain employed are experiencing real wage increases. However, for a few reasons, the wage situation is likely less rosy than this number suggests. First, nominal hourly wage growth is slowing—over the last three months it has grown at an annual rate of 2.2%. Second, to the extent that lower-wage workers are facing disproportionate job loss, increases in average wages may reflect the fact that there are relatively fewer low-wage workers, rather than actual wage gains. Finally, due to reductions in hours, weekly paychecks are growing more slowly than hourly wages, at a rate of 1.5% over the last year and 1.0% over the last three months. In March, nominal weekly paychecks saw their first decline of the recession, dropping a 0.1%.

The March employment report offers no hint of light at the end of the tunnel—instead, it shows that the labor market is still deteriorating quickly. While the February stimulus package will very likely achieve its original goal of creating or preserving between three and four million jobs, the labor market is already seven million jobs below where it needs to be. Considerable additional stimulus will be needed to keep the unemployment rate from reaching double digits by the end of the year.

1. Thanks to Brad Delong for inspiring this plot—see

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See more work by Kathryn Anne Edwards and Heidi Shierholz