This month’s employment report was deeply disappointing, and would
have been shockingly low if we didn’t get the heads up from the
very weak ADP report on Wednesday. The rate of job creations slowed
dramatically to just a total of 54,000, from 232,000 in April, and
far below the 169,000 consensus expectation. Those expectations had
already come down sharply in the wake of the ADP report.
Also the job creation totals for both April and March were revised
lower. The unemployment rate inched up to 9.1% from 9.0% and both
the civilian participation rate and the percentage of the
population that is employed were unchanged. The median duration of
unemployment rose to 22.0 weeks from 20.7 weeks. All in all an
extremely weak report, and it is very hard to find any silver
linings.
Men vs. Women
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 slipped back. In May, the unemployment
rate for adult men (over 20) rose to 8.9% from 8.8% in April, but
down from 9.9% as recently as November. It is down from 9.8% a year
ago. A bit of the year-over-year decline is an illusion, though, as
the participation rate for men fell from 74.4% a year ago to 73.6%
in May.
On the other hand, the increase in the unemployment rate from April
is also a bit of an illusion, as the participation rate rose from
73.4%. (for a fuller discussion of the importance of the
participation and employment rates see Jobs Report In-Depth, pt.
1). The employment rate for men rose to 67.1% from 66.9% in April,
and down from 67.1% a year ago.
For women, the unemployment rate rose to 8.0% in May, up from 7.9%
in April, but down from 8.1% a year ago. The participation rate was
59.9%, it had been at 60.0% since January, but down from 60.5% a
year ago. The employment rate fell to 55.2% from 55.3% in April,
and is below the 55.6% 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. The falling participation
rate means that the job situation for women deteriorated this month
by more than the increase in the unemployment rate alone would
indicate. Conversely, the deterioration for men was not quite as
bad as it looks at first glance.
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.
Teenage Unemployment
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 are acne, not wrinkles and age spots as is the case
now.
Things got a little bit better teens in May. The teen unemployment
rate fell to 24.2% from 24.9% in April, and is down from 26.4% a
year ago. The trend looks encouraging, but don’t get too excited
about it, as it is mostly an illusion. The participation rate fell
to 33.3% from 33.7% in March, and is well below the 35.4% rate a
year ago. The percentage of teens who actually have a job fell to
25.2% from 25.3% in April, and is down from 26.1% 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.
Breakdown by Race
Not surprisingly, Whites have a lower unemployment rates that do
Blacks or Hispanics. The White unemployment rate was unchanged at
8.0% for the month, but is down from 8.8% a year ago. The
participation rate was unchanged at 64.7% in May, though it is down
from 65.3% a year ago. The employment rate for whites was also
unchanged at 59.5% from last month but is down from the year-ago
level of 59.6%.
Thus it is a fair conclusion that the jobs picture did not change
significantly for Whites on the month, but decline from a year ago
in the unemployment rate is largely due to the fall in the
participation rate.
The unemployment rate for Blacks rose to 16.2% from 16.1% in March,
and is above the 15.5% a year-ago level. The true picture, though,
is much worse than that. For the month, the participation rate for
Blacks fell to 61.1% from 61.5%, so the monthly deterioration much
worse than it appears. A year ago, the participation rate was
62.7%. Thus, the employment situation for Blacks over the last year
has deteriorated noticeably.
The employment rate for Blacks fell to 51.2% from 51.5% in April,
and is down from 53.0% a year ago. The unemployment rate is 102.5%
higher than for Whites, and the employment rate is 13.9% lower
(51.2% vs. 59.5%). The participation rate is just 4.9% lower. A
year ago, the participation rate was 4.0% lower and the employment
rate was 11.1% lower. A year ago, the unemployment rate for Blacks
was 76.1% higher than the White unemployment rate.
For Hispanics, the unemployment rate in May rose to 11.9% from
11.8% last month but down from 12.4% last year. The true picture
was a bit more downbeat than that. The participation rate fell to
66.3% from 66.6% in April and from 67.7% a year ago. The employment
rate slipped to 58.4% from 58.7% last month. A year ago the
Hispanic employment rate was 59.3%.
The participation rate by Hispanics is actually 2.5% higher than
for Whites, but a year ago it was 3.7% higher than for Whites. The
employment rate is 1.8% lower, while a year ago it was 0.5% lower
than for Whites. Over the last year the unemployment rate has moved
from being 40.9% higher than the White unemployment rate to 48.8%
higher than for Whites.
Stay in School
The unemployment rate for high school dropouts rose to 14.7% from
14.6% in April. It is down from the year-ago level of 14.9%. The
monthly deterioration is actually worse than it appears, but the
year-over-year decline is an illusion. The participation rate
amongst dropouts fell to 45.1% from 45.5% last month and from the
45.7% level of a year ago. The percentage of high school drop outs
actually employed fell to 38.5% from 38.9% last month and is down
from 38.9% 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 7.8%, up from 7.6% in April but 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) fell to 9.5% from 9.7%. in April. 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 54.7% higher than
for those who at least finished high school. The participation rate
for high school grads was unchanged at 60.4% from a month ago. A
year ago it was 61.9%. Thus, the improvement from last year is
somewhat of an illusion.
The employment rate for high school grads was also unchanged from
last month at 54.6%, but is down from 55.2% a year ago. Note that
the participation rate and the employment rate are much higher for
high school grads than for dropouts. The payoff from graduating is
thus actually much higher than the unemployment rate differential
(as big as it is) would indicate.
Those who went to college but did not finish or only got an
Associates Degree, had an unemployment rate of 8.0%, up from 7.5%
in April, but down from 8.3% a year ago. The participation rate for
Associate Degree holders was unchanged at 69.7% but is down from
71.0% a year ago. The employment rate dipped to 64.1% from
64.5% in April but is down from the 65.1% level of a year ago.
There is still a sizable payoff in terms of employment prospects
from going to Community College, although the difference is not
quite as dramatic as the payoff from simply graduating from high
school. The high school grad unemployment rate is 18.7% higher than
that of the Junior College set.
For those who stay in school to get their BA (or higher), the
unemployment rate was unchanged on the month at 4.5% from 4.4% in
March, and is down from 4.6% a year ago. The participation rate
rose to 77.5% from 77.0% in April, and from 77.2% a year ago. The
percentage of college grads with jobs was rose to 74.0 from 73.5%
last month and from 73.7% a year ago.
The following graph (from this source) is unfortunately not updated
with the May 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.
Better for First-Timers
The unemployment rate for people 20-24, those who are just entering
the full-time workforce was 14.7% down from 14.9%, but up from
14.6% a year ago. This 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 10.4% 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
last 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 30,000
workers, and have trimmed their payrolls by 291,000 over the last
year.
Actually it is mostly at the local government level where the
declines are occurring. Local government employment was down by
28,000 on the month, and is down by 267,000 from a year ago. The
number of state employees was down 2,000 on the month and is down
by 24,000 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
572,000 over the past year (mostly due to the hiring of temporary
Census workers last year).
Within local government, education jobs were down by 17,500 for the
month and are down by 150,800 over the last year. 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?
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