April 4, 2003
Jobless recovery at two-year mark
Payrolls down over two million since recession began
The jobless recovery continued in March 2003 as the nation’s payrolls contracted by 108,000, according to report released today by the Bureau of Labor Statistics (BLS). These losses are in addition to last month’s payroll declines, which also were revised up to 357,000. Taken together, the economy has lost 465,000 jobs in the past two months. In the two years since the recession began in March 2001, total payrolls have fallen by 2.1 million and private sector payrolls are down by 2.6 million.
The unemployment rate was unchanged at 5.8% in March. However, one reason the unemployment rate has not increased in the past two months is due to the growth in persons not in the labor force, even though they say they currently want a job (note that only active job seekers are counted as unemployed). This number surpassed 5 million in March 2003 and is up 673,000 since the recession began.
While job losses by sector were again pervasive, retail trade and local government stood out as important trouble spots. Retail trade employment fell by 43,000 last month, following a revised decline of 117,000 in February. Some have argued that recent declines in retail employment are exaggerated by weather-related adjustments or the impact of war. While low consumer confidence related to the war may be playing some role in weak retail hiring, the longer-term negative trend in the sector points to a fundamental weakness in consumer demand. Since the recession began in March 2001, retail trade employment is down 448,000 (or 1.9%). This decline in retail trade–both in numbers and percent–is the largest such drop two years out from a business cycle peak since the early 1950s.
Another notable loss is the 40,000 decline in government employment, driven primarily by payroll cuts in local education (down 30,000). Public-sector employment, which is less affected by the business cycle, has been one of the few sources of growth over the recession, adding 26,000 jobs per month on average through February 2003. March’s loss suggests that state budget cuts are starting to be felt in education employment, a key area of the public sector.
Although the current recession/jobless recovery has been called mild based on the fact that gross domestic product fell for only a few quarters, by another critical measure—the loss of private sector employment—this has been an especially deep recession. The figure below shows the percent decline in private sector jobs over each of the post-war recessions, taken two years out from the peak of the prior business cycle. The current jobless period stands out as the weakest on record.
Though unemployment rates were little changed for most groups, a few trends are worth noting. The broad-based nature of the weak labor market can be seen in the slight uptick in unemployment among the college educated–from 3.0% to 3.1%–the highest rate for this group thus far over the recession and the highest since April 1993. New industry and occupation categories from the BLS offer further evidence (note that, since these are new categories, they are not yet seasonally adjusted). The jobless rate in professional and business services is up from 7.5% to 9.1% over the past year, and unemployment in service occupations is up from 6.7% to 7.9%.
Over the first quarter of this year, hourly wages grew at an annual rate of 3.2%, a slight deceleration from last quarter’s 3.5%. Over the past year, rising unemployment has slowed wage growth by about 1.0%. Note also that, due to rising energy costs, quarterly inflation is now increasing at a rate above 4.0%. Thus, on average, workers are losing ground to inflation, which could constrain consumption in future months.
Today’s disappointing payroll losses cannot be explained by the call-up of military reservists. While the BLS cannot be certain of the impact of reservists in the payroll data, the call-ups should have no impact on the unemployment rate, which covers only the civilian population. On the payroll side, while it is possible that some job losses are due to the call-up, the increase in reservists between this month and last can explain only 60,000 at most, and that would assume that every single one of those openings remained unfilled.
Two years since the recession began, the nation’s jobless recovery persists, as weak demand continues to depress hiring throughout the job market. Few sectors show any signs of significant activity, and government hiring, which had been one consistent source of growth, appears to be reversing with signs of state-level budget cuts.
—Jared Bernstein
with research assistance by Brendan Hill
The Economic Policy Institute JOBS PICTURE is published each month upon release of the Bureau of Labor Statistics’ employment report.
