November 7, 2008
Unemployment rate reaches highest level in over 14 years
By Heidi Shierholz with research assistance from Tobin Marcus
Payroll employment declined for the 10th month in a row, dropping by another 240,000 in October alone, according to today’s report from the Bureau of Labor Statistics. Furthermore, data revisions show that an additional 179,000 jobs were lost in previous months than initially reported. That brings the total number of job losses to 651,000 in the last three months and 1.2 million since December 2007.
The private sector has been particularly hard hit. Non-government jobs dropped by 263,000 last month and are down 1.4 million since peaking in November 2007. Since government employment is less sensitive to the business cycle, the private-sector losses are more representative of the full extent of labor market weakness.
Over the past 18 months, 3.3 million workers have been added to the jobless rolls, and there are currently 10.1 million unemployed workers in this country. The unemployment rate rose from 6.1% in September to 6.5% in October, its highest rate since March 1994. Underemployment, a more comprehensive measure of the extent of labor market weakness, rose to 11.8%, its highest level in over 14 years. Underemployment’s growth is primarily due to a surge in people working part-time but wanting full-time jobs—up 645,000 from September to October, and by 2.3 million over the past year.
The overall unemployment rate masks large differences in unemployment among subgroups. The unemployment rate for blacks remains extremely high at 11.1%. The unemployment rate for Hispanics continued to rise last month, increasing a full percentage point to 8.8% unemployment. The bad news is not limited to minorities, as white unemployment rose 0.5 percentage points to 5.9%.
Unemployment among college graduates increased sharply in October, with 1.4 million college-educated Americans now unemployed, up 280,000 from a month ago. This increase in unemployment among college graduates accounted for over 58% of the total rise in unemployment among people over age 25, though only one-third of this group has a college degree. This is clear signal that distress in the financial sector is generating unemployment at the top of the education ladder.
Given the lack of job creation in the current economy, large numbers of job seekers have been stuck in unemployment for long periods. Extended unemployment spells, as measured by the share of unemployed who have been jobless for at least six months, increased to 22.3% in October, the highest long-term share since June 2004.
High unemployment levels are reflected in slower weekly wage growth. Weekly earnings for most workers, before accounting for inflation, rose 2.9% over the past year—well below September’s annualized inflation of 4.9%. Wage growth in the last two months was markedly slower than earlier in 2008. While prices in coming months are expected to grow more slowly due to declining energy costs, paychecks will likely continue to lag behind prices, furthering the squeeze on working families.
Job losses occurred across most industries, with over 60% of them shedding jobs. Factory jobs were down by 90,000 last month, including declines in autos and parts, which saw a loss of 9,100 jobs (equalling 1% of employment in that subsector). This was the 28th consecutive month of job losses in manufacturing, including a loss of 517,000 over the last year. Job losses also continued in construction, which was down 49,000 last month, with losses in both residential and non-residential building.
Service employment was also down, as private services (excluding government) shed 131,000 jobs in October. Probably as a result of weak consumer spending, retail trade employment dropped by 38,100, with large losses in auto dealerships (down 20,300) and department stores (down 18,000). Financial services, which have been strongly affected by the bursting of the housing bubble and the ensuing crisis in the financial markets, shed 24,000 jobs last month and 127,000 over the past year.
Only health care and government continue to reliably generate job growth. Since January, while overall payrolls shed more 1.2 million jobs, health care employment grew by 298,000, including 26,000 last month. Government employment grew by 163,000, adding 23,000 last month. The gains last month were largely in local government.
As this report shows, the economy is in deep recessionary territory. What this means is that millions of working families are unable to find the jobs or the hours at work they need, while those who are working are seeing much slower wage growth. The consequent loss of income means that consumption—which makes up 70% of the economy—is also slowing.
To pull out of this negative spiral, it is imperative that policy makers pass a large second economic recovery plan—on the order of $300 billion—that is focused on elements that provide the maximum economic bang for the buck. High-benefit economic boosts include the expansion of unemployment insurance benefits, expansion of food stamps and heating assistance, aid to cash-strapped states, and spending on infrastructure projects that can be started immediately, including schools, roads, bridges, transit, and water treatment plants.