ANF Abercrombie and Fitch Co

Demographics of Joblessness

This recession has hit men harder than it has hit women. However, over the past year, things seem to be “evening out” between the genders, and this month both made progress. In March, the unemployment rate for adult men (over 20) fell to 8.6% from 8.7% in February and from 9.9% as recently as November. It is down from 10.0% a year ago.

A bit of the decline is an illusion, though, as the participation rate for men fell from 74.2% a year ago to 73.4% in March, unchanged from February (for a fuller discussion of the importance of the participation and employment rates see "Jobs Report In-Depth, pt. 1"). That is up from 73.2% in January. The employment rate for men fell to 67.0% from 67.1% in February, but up from 66.8% a year ago.

For women, the unemployment rate fell to 7.7% in March, down from 8.0% in both February and a year ago. The participation rate was 60.0%, unchanged from both February and January, but down from 60.5% a year ago. The employment rate rose to 55.4% from 55.2% in January, but is still below the 55.7% rate a year ago.

For both sexes, there has been a real year-over-year improvement in the employment situation, but it is not as big as just looking at the unemployment rates would indicate.

In the overall big picture, men have fared far worse than women in this downturn. There are two possible reasons for that. The first is that the industries that have been particularly hard-hit in this downturn tend to be far more male dominated than the industries that have skated though this recession more or less unscathed.

The most glaring example of this would be the construction industry versus the health care industry (more on the industry breakdowns below). The second explanation is that, on average, women tend to still be paid far less than men do, and employers might be more prone to let their relatively high-priced male employees go first before their cheaper female employees. The industry effect is probably the bigger one, but the two are not mutually exclusive and both might be playing a role. 

Joblessness and Teenagers

Teens, regardless of gender, have had a very hard time of it in this recession. Just go to a McDonald's (MCD) and you will see this for yourself. Normally the blemishes you see on the cashier's face is acne, not wrinkles and age spots as is the case now.

Things got even worse for teens in March. The teen unemployment rate rose to 24.5% from 23.9% in February, but is down from 26.0% a year ago. Things are not quite as bad is they sound (and yes, they are a disaster, but the monthly changes were not quite as bad as a 0.6% increase would indicate). The participation rate rose to 34.1% from 33.5% in February, but is still well below the 35.8% rate a year ago.

The percentage of teens that actually have a job rose to 25.8% from 25.5% in February, but this is down from 26.5% a year ago. While for the most part the earnings from teen jobs tend to go towards clothes from Abercrombie & Fitch (ANF) and other teen clothing stores, for many it is a significant part of paying for college.  Also when teens work, they learn important job skills, such as the importance of actually showing up, and doing so on time.  The extremely low levels of teens working is not a good sign for the future.

Racial Demographics

Not surprisingly, Whites have a lower unemployment rates that do Blacks or Hispanics. This month, the picture was mixed. The White unemployment rate fell to 7.9% from 8.0%, and is down from 8.7% a year ago. It is down from 8.9% in November. The participation rate rose to 64.6% in March, from 64.5% in February, though it is down from 64.8% a year ago. The employment rate for Whites rose to 59.5% from 59.4% in February and from 59.3% in January but is down from the year-ago level of 59.6%. It thus is likely that the real employment situation for Whites has improved so far this year.

The unemployment rate for Blacks rose to 15.5% from 15.3% in February, but is well below the 16.5%  level a year ago. Here, though, the change in the headline unemployment numbers from a year ago are a bit exaggerated due to changes in the participation rate, and the month-to-month deterioration is understated.

For the month, the participation rate for Blacks fell to 61.5% from 61.7%, so the monthly deterioration is actually much worse than it appears. A year ago, the participation rate was 62.6%. The employment rate for Blacks fell to 51.9% from 52.2% in January, and is down from 52.3% a year ago. The unemployment rate is 96.2% higher than for whites, and the employment rate is 12.8% lower (51.9% vs. 59.5%). The participation rate is just 4.8% lower.

A year ago the participation rate was 3.4% lower and the employment rate was 12.2% lower. A year ago the unemployment rate for Blacks was 89.7% higher than the White unemployment rate.

For Hispanics, the unemployment rate in February fell to 11.3% from 11.6 last month, from 11.9% in January and down from 12.5% last year. The monthly improvement is understated as the participation rate rose to 66.4% from 66.1% in February. Part of the year-over-year improvement, though, is an illusion as the participation rate is down from the 67.9% level last year.

The employment rate rose to 58.9% from 58.4% last month and 59.1% in January. A year ago the Hispanic employment rate was 59.4%. The participation rate by Hispanics is actually 2.8% higher than for Whites, but a year ago it was 4.8% higher than for Whites. The employment rate is 1.0% lower, while a year ago it was 0.3% lower than for Whites. Over the last year, the unemployment rate has moved from being 43.7% higher than the White unemployment rate to 43.0% higher than for Whites.

Stay in School

The unemployment rate for high school dropouts fell to 13.7% from 13.9% in February and from 14.2% in January. It is down from the year-ago level of 14.4%. Again, the monthly improvement is actually better than it appears, but the year-over-year decline is partly an illusion. The participation rate amongst the drop outs rose to 46.1% from 45.5% last month and from 45.1% in January but is down from the 46.3% level of a year ago.

The percentage of high school dropouts actually employed rose to 39.8% from 39.2% last month and from 37.2% January, and is up slightly from 39.7% a year ago. I should note here that the numbers by level of education refer to people over age 24, and so are not directly comparable to some of the other numbers. The overall unemployment rate for people over 24 years old was 7.4%, down from 7.6% in February and January and down from 8.3% a year ago.

Just finishing high school or getting your GED substantially increases your odds of having a job.  The unemployment rate for high school grads (with no college) was unchanged at 9.5% but up from 9.4% In January. It is down from the 10.8% rate a year ago. In all three months, the level was still far below that for dropouts. This month, the unemployment rate for dropouts was 44.2% higher than for those who at least finished high school.

The participation rate for high school grads was fell to 60.0% from 60.3% last month. A year ago it was 61.7%. Thus, the improvement from last year is somewhat of an illusion, and month to month, things actually deteriorated, rather than stayed unchanged as the unemployment rate alone would indicate. The employment rate for high school grads fell to 54.4% from 54.6% in January and is down from 55.0% a year ago. Note that the participation rate and the employment rate are much higher for high school grads than for dropouts.

Those who went to college but did not finish, or only got an Associates Degree, had an unemployment rate of 7.4%, down from 7.8% in February, and down from 8.3% a year ago. The improvement here is actually better than it appears. The participation rate for Associate Degree holders rose to 69.7% from 69.5% in February but is down from 70.9% a year ago. The employment rate rose to 64.4% from 64.1% in February but is down from the 65.1% level of a year ago.

For those who stay in school to get their BA (or higher) the unemployment rate rose to 4.4% from 4.3% in February, and is down a tick from 4.8% a year ago.  The participation rate was unchanged at 76.9% after rising from 76.4% in January and is up slightly from 74.3% from a year ago.  The percentage of college grads with jobs fell to 73.5% from 73.6% in January but is above the 73.4% level of a year ago.

The next graph (from this source) is unfortunately not updated with the March data, but shows the long-term history of unemployment by level of education. While the level of unemployment is always higher the less education one has, the relatively uneducated really get hit hard when the economy turns south.



The unemployment rate for people 20-24, those who are just entering the full-time workforce, was 16.4% -- unchanged from last month, and down from 18.2% a year ago. This year-over-year decline is good news. If these people cannot get jobs, they tend to remain living with Mom and Dad. This slows the rate of household formation, and hence the demand for housing. That makes it difficult for the economy to absorb the huge housing inventory overhang.

Normally housing is the locomotive that pulls the economy out of recessions. That locomotive is still derailed, and it is the principal reason that this recovery has been so sluggish. The improvement in the unemployment rate for these folks is good news, but the level is still extremely problematic. The unemployment rate for those a bit older, the 25 to 34 year old cohort, which is the prime age for first-time home ownership, fell to 9.3% from 9.5% last month and down from 11.1% a year ago.

Lowering the unemployment rate amongst these people will be a key to resolving the housing problem. We are making progress, but still have a long way to go. Several studies have shown that not being able to get a job right after finishing school hurts people not only short term, but the effects lasts their entire working career.

Where the Jobs Are (and Are Not)

The private sector actually added more than the total number of jobs again this month. State and local governments laid off 14,000 workers, and have trimmed their payrolls by 282,000 over the last year.  Actually it is mostly at the local government level where the declines are occurring.  Local government employment was down by 14,000 on the month, and is down by 259,000 from a year ago. The number of state employees was unchanged on the month and is actually down by 23,000 over the last year.   

In looking at the effectiveness of the stimulus program from the Federal government one should keep in mind the massive anti-stimulus effect of budget cuts and tax increases (mostly budget cuts) at the State and Local levels of government. Federal Government employment was up 1,000 for the month but is down by 74,000 over the past year (partially due to the hiring of temporary Census workers last year).

There were sharp downward revisions to the February numbers for State and Local employment. The number of State level employees fell by 17,000 in February, not the 12,000 we were told last month, and the number of Local government employees getting pink slips was 30,000, not 18,000.

Within local government, education jobs were down by 9,200 for the month and are down by 151,400 over the last year. State level education jobs (mostly professors at state universities and community colleges) fell by 1,100 for the month and are down 29,500 from a year ago.

Given the huge disparity in the unemployment rate between the uneducated and the highly educated that I discussed above, one has to seriously question the wisdom of laying off so many K-12 teachers. Seriously, people worry about the burden that we are putting on our Children due to the increase in the Federal debt. Just how do we expect them to bear that burden if most of them are illiterate and innumerate? How are we going to compete in the future against countries that actually think it is a good thing to educate their future workforce?

The private sector added 230,000 jobs, on top of an increase of 240,000 jobs in February (revised up from 222,000). That was a huge improvement from an addition of 68,000 (revised up from 63,000) jobs in January. The improvement was also better than that of December, when 167,000 private sector jobs were added. It seems likely that the January number was artificially depressed by the awful weather. Thus it was not really as bad as it looked, but conversely, February is probably not quite as strong as it appears.

The average of the last three months of 188,000 is probably a better representation of the real underlying growth rate of private sector jobs. That’s good -- but hardly great -- especially coming out of a deep recession. The March number was nicely above the consensus expectations of 203,000 private jobs gained.

The upward revisions to previous months have been happening regularly for several months now. That makes it likely that when the April jobs report comes out, the March numbers will also be revised higher. I would not be surprised if the February numbers are also revised up again next month as well.

This is the 16th straight month that the private sector has added jobs, with a total increase of 1.656 million over the last year. In a normal year, that would be a great showing, but we lost over 8 million jobs in the Great Recession, so we still have our work cut out for us.

Goods Producing Sector

Within the private sector, the goods producing sector gained 31,000 jobs, on top of a gain of 73,000 in January (revised up from 70,000). Over the last year, employment in the goods producing sector is up 238,000. The construction industry lost 1,000 jobs after gaining 37,000 (revised down from 33,000) last month. Since construction takes place outdoors, it is one area where the weather effects are most apparent.

The construction industry has been particularly hard-hit in this downturn, accounting for about 30% of all the jobs lost, even though at the start of the recession it accounted for less than 6% of the total jobs in the country. As these jobs generally do not require a lot of formal education, the demolition of construction helps explain why the unemployment situation is so dire for those who never went to college. As a male dominated industry, it also helps explain why this recession has been so much tougher on men than it has been on women.

Employment in Construction peaked before the rest of the economy, in April 2006. Since then we have lost 2.212 million construction jobs. Most of the decline though happened after the overall private sector jobs peaked in December 2007, and since then Construction jobs are down by 2.171 million, or 28.3%. Since the peak, overall private sector employment is down by 7.034 million. In other words, this one industry is directly responsible for 30.9% of all job losses since the end of 2007, even though it was responsible for just 6.47% of all private sector jobs in December 2007.

Manufacturing gained 17,000 jobs, on top of 32,000 gained in January. Manufacturing employment has been in a secular decline for about 30 years, but it has actually fared pretty well over the last year or so. The peak in manufacturing jobs was way back in July of 1979 at 19.531 million. By the time the Great Recession started in December 2007, the number of manufacturing jobs was already down to 13.740 million.

The low in manufacturing jobs was in December 2009 at 11.456 million, and since then we have gained back 211,000 of those jobs. Still, relative to the start of the Great Recession, manufacturing jobs are down by 2.073 million, representing 29.5% of all job losses from the peak.

The service sector gained 199,000 jobs in the month, up from an increase of 167,000 in February (revised from a gain of 152,000) but down from a gain of 163,000 in October (revised from 146,000). Relative to a year ago, private service sector jobs are up by 1.418 million, but are still off by 3.251 million from the start of the Great Recession.

One of the biggest contributors to service sector jobs, as always, was the health care industry, which added 44,500 jobs. The health care industry has not had a single down month in terms of employment in the entire downturn. The health care industry has a far higher proportion of women working in it than does the economy as a whole, and this is a big part of the reason that the unemployment rate for women is so much lower than that for men.

Temp Jobs Growing

Of particular interest is the increase in temporary workers. Those jobs increased by 28,800 in March after rising 22,700 (revised from 15,500) in February. It is not that being a temp is the greatest or highest paying job in the world that makes them of particular interest. It is because they are a good leading indicator of future employment trends.

When during a downturn an employer first sees a pick up in demand, he will not know if it is just a temporary blip, or the start of a real recovery. Thus he is going to be hesitant to take the time and expense of bringing on new workers who will just have to be laid off it if does turn out to be just a blip. The first thing she is going to do is work the existing workforce harder. This is particularly if hours have been previously cut back due to slow demand.

The upward trend in the average work week is a very good sign in that regard, in addition to the fact that working more hours means more income, and thus more spending by hourly employees. The second thing an employer will do when faced with an increase in demand is going to be to call a temp agency. Only when the employer is reasonably sure that the upturn is for real and will last will he figure that it is worth bringing on a full-time permanent employee.

However, temp jobs have been trending higher since August 2009, and one would think that we would be starting to see those translating into permanent jobs at a faster rate at this point. That disconnect could be pointing to some sort of structural shift in the employment market, but it is too early to say. Since 8/09, the number of Temps is up by 512,200 or 29.3%, but is still 14.5% below the level at the start of the Great Recession.

The number of people working part time for economic reasons -- in other words, because that is all they could find, or because their previously full-time job has had its hours cut back, rose to 8.433 million, up 93,000 from February but down 579,000 from a year ago. That is also a good sign.

It can be seen in the decline of the “underemployment rate” (U-6 for you wonks out there) which fell to 15.7% from 15.9% last month and from 16.1% in January and down from 16.8% a year ago. That is still a very high rate. After all, if you are used to working 40 hours a week, but have been cut back to just 20 hours a week, you might not be unemployed, but economically you are still struggling.  It is not that part time jobs are going away. The number of people who were working part time because that is what they want to do increased by 197,000 for the month, and is up 83,000 from a year ago.

(NOTE: Part 3 of this article will be published later today.)
 
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