December 7, 2001

Recession hammers labor market again

Unemployment rose sharply again in November to 5.7%, and the nation’s businesses continued to shed jobs, according to today’s report from the Bureau of Labor Statistics. Both the increase in unemployment and the loss of payroll employment were greater than forecasters expected.

Unemployment rose from 5.4% in October to 5.7% in November, the highest rate since the summer of 1995. Over the past two months, the unemployment rate increased by 0.8 percentage points, the largest two-month increase since April/May 1980, when the economy was also in recession. Over 8 million people are now unemployed, an increase of 2.5 million over last November.

Payrolls contracted again, dropping another 331,000 jobs in November. Since the beginning of the recession in March, private-sector payrolls are down by 1.5 million, with a drop of 953,000 jobs in the last three months alone. This decline stands in sharp contrast to private-sector payroll growth in 2000 of 2.4 million jobs.

The increases in both unemployment and job losses were spread broadly through the economy (though manufacturing has been the hardest-hit sector by far). Interestingly, unemployment increased for all educational groups, rising 0.4 points for high school dropouts, high school graduates, and college graduates. Over the past year, unemployment has increased from 6.6% to 8.1% for dropouts, a rise of 1.5 percentage points. The unemployment rate for college graduates rose 1.5 percentage points over the last year, from 1.6% to 3.1%. These trends suggest that, as in the last recession, the impact of the downturn is more broadly felt than in earlier recessions.

The manufacturing sector again led in employment losses, shedding another 163,000 jobs, the largest monthly loss since July 1998. As a share of private-sector employment, manufacturing has declined remarkably, from 17.9% to 15.5% since April 1998. But as was true in October 2001, November’s report indicates losses beyond manufacturing. Temporary help continued its sharp slide and is down 18% since its last peak in September 2000. Trade, both wholesale and retail, also continued to lose jobs. Air transportation cut 45,000 jobs and is down 84,000 since August 2001. Clearly, the bailouts to the airlines have done little to prevent job losses.

The scope of the downturn is pervasive. Due to the lack of job creation, the duration of joblessness is rising. The share of persons unemployed for at least 15 weeks increased by 6.1 percentage points over the past year, while the share unemployed less than five weeks fell by the same amount. The size of the labor force (employed plus unemployed) also contracted last month, as potential job seekers presumably gave up looking for work. The unemployment rate of women who maintain families, mostly single mothers, also jumped sharply, from 6.9% to 8.3%, posing a real challenge for the welfare-to-work component of welfare reform.

Numerous recent reports regarding consumer spending and industrial activity have led some analysts to conclude that the recession is “bottoming out,” and that overall economic growth will soon turn positive. Whether or not these forecasts are accurate, in terms of jobs and earnings, simply moving from negative to positive growth will not prevent unemployment from rising further. The unemployment rate will continue to increase until the economy returns to growth rates of at least 3%; returning to 4% unemployment, which should be the goal, would require even faster growth.

–Jared Bernstein, with research assistance by Thacher Tiffany

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