Commentary | Wages, Incomes, and Wealth

Pain on Main Street is getting worse

Last week’s unemployment report that showed fewer job losses in April than in prior months has sparked hopes that the troubled U.S. economy has finally turned a corner. John Irons, EPI’s Research and Policy Director, and Economist, Heidi Shierholz, joined the debate on the National Journal’s Expert blog, where they shared some analysis of how many more Americans could be affected if unemployment rises to 9.8% next year, as projected. Such a scenario would mean that 40% of the African American and Hispanic work force would be unemployed or underemployed at some point in 2010. The complete text of their analysis follows:

The rate of job loss for the first part of the year has been staggering – 2.7 million jobs lost so far in 2009. The April losses were indeed smaller than the first quarter, and we’re cautiously optimistic that trend will continue. One of the reasons for caution, however, is the fact that a sizeable portion of the slowing job loss in April was due to the hiring of temporary workers in preparation for the 2010 Census; looking at the private employment alone, which excludes government hiring, we find that there were 611,000 private sector jobs lost in April. That number, however, is still less than the 710,000 private sector jobs lost on average per month in the first quarter. A full analysis of last month’s report is here.

Another reason for caution is that wage growth, which had been holding up earlier in the recession, has collapsed in recent months. For the first year of the recession, from December 2007 to December 2008, nominal average hourly wages grew 3.9%, but in April, they grew at an annualized rate of 0.7%. Stalling wage growth will put additional downward pressure on consumption.

Furthermore, while the pace of losses may be slowing, it is important to keep in mind that the losses are still huge and the pain on main street is deepening. The jobless rolls increased by 563,000 in April, as the unemployment rate rose to 8.9%. The male unemployment rate rose to 10.0% and the black unemployment rate soared to 15.0%. Nearly one in six US workers is either unemployed or underemployed, and there are currently around 5 unemployed workers for every available job, meaning that there are literally millions of jobless workers who have little hope of finding work until the economy starts adding jobs at a healthy rate.

These employment numbers also understate the number of people that would be impacted by an un- or under-employment spell at some point during the year. If the overall unemployment rate rises to 9.8 percent in 2010, as projected by Moody’s, the share of the labor force experiencing unemployment or underemployment over the course of the year will be about a third. And over 40% of the black and Hispanic labor force would be expected to be unemployed or underemployed at some point in 2010.

And the problem is, that turning point – the point where the economy starts adding jobs at a healthy rate – is a long way off. Simply to keep up with population growth, the economy must add around 127,000 jobs a month. In other words, in order to start seeing the unemployment rate come down, we have to not just add jobs every month, we have to add a lot of jobs every month. After the official end of the last two recessions, the unemployment rate continued to rise for about a year and a half, and unemployment didn’t get back down to its pre-recession levels for around another three and a half years after that. If those recessions are any indication of what will happen this time around, the workers of this country are in for a very long and painful haul.

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