Economic Indicators | Jobs and Unemployment

Jobs Picture, June 5, 2009

Jobs Picture for June 5, 2009

Been down so long it looks like up to me

by Heidi Shierholz with research assistance from Kathryn Edwards and Andrew Green

The unemployment rate increased from 8.9% to 9.4% in May, as the Household Survey showed that over three-quarters of a million workers were added to the jobless rolls, according to the Bureau of Labor Statistics. May marked the 17th straight month of job loss; the current recession is now officially the longest economic downturn since the Great Depression. The Establishment Survey showed that the U.S. economy lost 345,000 jobs in May, compared to an average monthly loss of 643,000 jobs in the previous half-year. Many will see the declining pace of job-loss in this month’s report as good news. However, last month’s numbers should be put into a larger context: before the current recession, the 0.3% decline in total employment in May would have been the second largest monthly decline in a quarter century. It is only in the midst of a historically steep recession that losing 345,000 jobs in a single month is actually taken as a good sign.

One trend worth highlighting in today’s jobs report is the continued dramatic collapse of wage growth. For the first year of the recession, wage growth remained relatively strong; nominal (non-inflation adjusted) hourly wages for production/nonsupervisory workers (who comprise over 80% of payroll employment) grew 3.9% from December 2007 to December 2008. Since that time, however, wage growth has slowed abruptly; in May 2009, wages grew at a 1.3% annualized rate, one-third the earlier pace. The chart shows nominal hourly wage growth since 2007. Weekly wage growth has declined even more as workers have seen their hours cut back — nominal weekly wage growth was 2.4% from December 2007 to December 2008 but declined at a 2.3% annualized rate in May. The recent collapse of wage growth — the last labor market indicator to deteriorate in this downturn — means not only that the recession is adversely affecting even those who keep their jobs, but also that there is additional downward pressure on consumption, which will suppress the pace of any economic recovery.


Since the start of the recession, the economy has shed a total of 6 million jobs, representing 4.3% of employment. But the country’s population didn’t simply stop growing in that month: in order to keep up with population growth, the economy must add approximately 127,000 jobs every month, which means 2.2 million jobs should have been added over the last 17 months. In other words, the economy is now 8.2 million jobs below where it would need to be to maintain pre-recession employment rates.

The index of aggregate weekly hours — a measure of the total number of hours worked in the economy and thus a more comprehensive measure than employment because it captures both job loss and reductions in hours for the workers who kept their jobs — continues to decline rapidly. It fell 0.7% in May (an annualized rate of 8.1%), and a total of 7.5% since the start of the recession. This is a steeper decline than in any recent recession including that of the early 1980s.

As has been the case throughout the downturn, manufacturing and construction saw the biggest losses in May. Manufacturing saw a decline of 156,000 jobs, for a total drop since December 2007 of 1.8 million, or 13.0% of that sector’s employment. However, May’s decline represented a slowing of losses in manufacturing, which had lost an average of 177,000 jobs per month over the previous six months. Construction saw a decline of 59,000 jobs in May, for a total of 1.2 million jobs lost in this recession (16.2% of employment). This was also a slowing of losses in construction, which had lost an average of 117,000 jobs per month over the previous six months.

Other sectors that contributed to the slowing of job loss were temporary help services, which lost 6,500 in May but averaged declines of 73,000 per month over the previous six months; retail trade, which lost 17,500 jobs in May but an average of 63,500 per month over the previous six months; and accommodation and food services, which added 9,200 jobs in May but lost an average of 30,200 per month over the previous six months. Federal government employment declined in May by 15,000, losing some of the gains made in the April from the hiring of temporary workers for the 2010 Census. State government employment remained flat in May, and local governments added 8,000 jobs.

In May, the unemployment rate rose from 8.9% to 9.4%, as 787,000 workers were added to the jobless rolls. Part of the dramatic increase in unemployment was due to a 350,000 increase in the labor force, many of whom likely entered the labor force as job seekers. There are now 14.5 million unemployed workers in this country, up 7 million from the start of the recession. If the ranks of the “marginally attached” (jobless workers who want a job but are not actively seeking work so are not counted as officially unemployed) and “involuntary part-time workers” (workers who want full-time jobs but can’t get the hours) are included for an overall “underemployment” count, the figure rises to 25.8 million, which means nearly one in six U.S. workers (16.4%) is either un- or underemployed.

Furthermore, unemployed workers are getting stuck in unemployment for long periods because there are so few job openings. In May, 3.9 million people, 2.5% of the labor force, had been unemployed for at least six months, nearly matching the record high of 2.6% set in early 1980s. Over one in four (27%) of the unemployed had been unemployed for at least six months.

While all major demographic groups have experienced large increases in unemployment during this recession, some are getting hit harder than others. Male unemployment increased to 10.5% in May, compared to 8% for women. Male and female unemployment rates were similar at the start of the recession (5.0% for men and 4.8% for women), but men’s concentration in manufacturing and construction has meant that they have lost much more ground in the downturn. In May, unemployment was 14.9% among black workers, 12.7% among Hispanic workers, and 8.6% among white workers (increases of 6.0, 6.5, and 4.2 percentage points, respectively, since the start of the recession). For workers with a college degree, the unemployment rate is 4.8%, higher than any period since at least 1979 (the earliest data available). Unemployment among those with only a high school diploma is more than double that of college-educated workers at 10%. Workers with less job experience are also particularly hard hit in this economy. Workers age 16-24 face an unemployment rate of 17.3%, 25-54 year olds are seeing 8.4%, and those 55 or older are at 6.7% (up 5.7, 4.4, and 3.6 percentage points, respectively, since the start of the recession).

The May employment report shows that while the pace of losses may be slowing, the U.S. labor market is still hemorrhaging jobs. With the continued loss of jobs and hours along with the collapse of wage growth, it is time to start thinking very seriously about additional stimulus spending.

The Economic Policy Institute JOBS PICTURE is published each month upon release of the Bureau of Labor Statistics’ Employment Situation report. 

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