This month’s employment report was just plain ugly. There were, on
balance, NO new jobs created in August, according to the
establishment survey. Also, the job creation totals for July were
cut to 85,000 from 117,000, and for June to just 20,000 from last
month’s estimate of 46,000. We were also far below the consensus
expectation of 75,000 jobs being created.
The household survey was stronger, but not exactly great either.
The unemployment rate was unchanged at 9.1%, and down from 9.6% a
year ago. For the month, the household survey was actually stronger
than that indicates, since both the participation rate rose, from
63.9% to 64.0% as did the employment rate, to 58.2% from 58.1%. But
both the civilian participation rate and the percentage of the
population that is employed were coming off levels not seen since
1983!
The year-over-year drop in the unemployment rate is an illusion, as
a year ago the participation rate was 64.7% and the employment rate
was 58.5%. The median duration of unemployment rose to 21.8 weeks
from 21.2 weeks. For perspective, the highest it ever hit prior to
the Great Recession was 12.3 weeks. The average duration, however,
ticked down to 40.3% from 40.4 weeks, but July was an
all-time record. The uptick in the participation and employment
rates were the only real silver linings in a very dark cloud.
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 that evening out continued. In August, the
unemployment rate for adult men (over 20) fell to 8.9% from 9.0% in
July, and down from 9.9% as recently as November. It is down from
9.6% a year ago.
The year over year decline is an illusion though as the
participation rate for men fell from 74.3% a year ago to 73.3% in
August, but rose from 73.2% in July. Thus the monthly drop in the
unemployment rate for men was actually bigger than it appears. (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 66.8% from 66.7% in July, but down from 67.0%
a year ago.
For women, the unemployment rate rose from 7.9% in July to 8.0% in
August, and unchanged from a year ago. The participation rate was
59.7%, up from 59.6% July, but down from 60.2% last year. The
employment rate was unchanged at 54.9% for the months, but is below
the 55.4% rate a year ago. Even though the unemployment rate is the
same as last year for women the true jobs picture is worse than it
was 12 months ago.
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 Workforce
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 like now.
Things got a little bit worse for teens in August. The teen
unemployment rate rose to 25.4% from 25.0% in June, but is down
from 26.2% a year ago. The month-to-month increase is, however, not
as bad as it looks. The participation rate rose to 34.5% from 33.7%
in July, but is well below the 35.2% rate a year ago.
The percentage of teens that actually have a job rose to 25.7% from
25.3% in July, but is down from 26.0% a year ago. In other words,
don’t be too hard on your kid if he tells you he can’t find a job.
He probably isn’t lying or just not trying.
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. In the Great Depression, we had the Civilian
Conservation Corps (CCC) that put unemployed kids and young adults
back to work. Perhaps it would be a good idea to do so in the
current climate. That, however, would entail the federal government
actually spending some money to help fix the problem.
Results by Race
Not surprisingly, Whites have a lower unemployment rates that do
Blacks or Hispanics. The White unemployment rate fell to 8.0% from
8.1% in July. It is down from 8.7% a year ago. The participation
rate was unchanged at 64.5% for the month, but down from 65.2% a
year ago. The employment rate for whites was also unchanged on the
month, at 59.3% but is down from the year-ago level of 59.5%.
Thus it is a fair conclusion that the jobs picture for Whites
improved slightly in the month, but the year-over-year improvement
is an illusion. It is largely due to the fall in the participation
rate, not a real improvement in the employment picture.
The unemployment rate for Blacks jumped to 16.7% from 15.9% last
month, and it is above the 16.2% a year-ago level. The true
picture, though, is murkier than that. For the month, the
participation rate for Blacks rose to 61.5% from 60.4% last month
but down from 62.2% a year ago, so the monthly deterioration was
not as bad as it looks, but the year-over-year situation is
actually worse than the unemployment number alone (as awful as it
is) would indicate.
The employment situation for Blacks over the last year has not
changed significantly. The employment rate for Blacks rose to 51.2%
from 50.8% in July, and is up slightly from 52.1% a year ago. The
unemployment rate is 108.8% higher than that for Whites, and the
employment rate is 13.7% lower (51.2% vs. 59.3%). The participation
rate is just 4.7% lower. A year ago the participation rate was 4.6%
lower and the employment rate was 12.4% lower. A year ago, the
unemployment rate for Blacks was 86.2% higher than the White
unemployment rate.
The unemployment rate for African American teens looks more like
the unemployment rates you associate with Africa. It jumped to
46.5% from 39.2% in July, and up from 45.7% a year ago. Some of
that is due to a rise in the participation rate this month to 24.2%
from 22.9% in July, but it is still down from 25.7% a year ago. In
August, just 13.0% of Black teens had a job, down from 13.9% in
July and 14.0% a year ago.
For Hispanics, the unemployment rate was unchanged for the month at
11.3% and down from 12.1% last year. The true picture is much more
downbeat than that. The participation rate rose to 66.3% from 66.0%
last month but down from 67.2% a year ago. The employment rate rose
to 58.8% from 58.5% last month. A year ago the Hispanic employment
rate was 59.1%.
Thus, the improvement in the job picture from last year one would
see if you only looked at the unemployment rate, is a mirage. On
the other hand, there was actually a month-to-month improvement,
rather than no change.
The participation rate by Hispanics is actually 2.8% higher than
for Whites, but a year ago it was 3.1% higher than for Whites. The
employment rate is 0.8% lower, while a year ago it was 0.7% lower
than for Whites. Over the last year the unemployment rate has moved
from being 39.1% higher than the White unemployment rate to 41.3%
today.
Stay in School
The unemployment rate for high school dropouts fell to 14.3% from
15.0% in July. It is up from the year ago level of 14.2%. The drop
for the month is only partly an illusion. The participation rate
amongst the drop outs fell to 46.7% from 46.9% last month and is up
from the 46.4% level of a year ago. The percentage of high school
drop outs actually employed rose to 40.0% from 39.9% last month and
from 39.8% 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 25
and older was 7.8%, unchanged for the month 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) rose to 9.6% from 9.3%.in July. It
is down from the 10.2% rate a year ago. In all three months, the
level was still far below that for drop outs. This month the
unemployment rate for dropouts was 49.0% higher than for those who
at least finished high school.
The reality, though, was that the deterioration in the job
situation for high school grads was much worse than it looks. The
participation rate for high school grads fell to 60.0% from 60.6%
in July. A year ago it was 61.9%. Thus, the improvement from last
year is an illusion, but the monthly rise was much worse.
The employment rate for high school grads fell to 54.3% from 54.9%
in July, and is down from 55.5% 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 8.2%, down from 8.3%
in July and down from 8.3% a year ago. The participation rate for
Associate Degree holders rose to 69.2% from 68.9% but is down from
70.5% a year ago. The employment rate rose to 63.5% from 63.2% on
the month but is down from the 64.4% 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 17.0% higher than
that of the Junior College set. The employment rate is 16.9%
higher.
For those who stay in school to get their BA (or higher) the
unemployment rate was unchanged at 4.3% for the month, and is down
from 4.6% a year ago. However, the participation rate fell to 76.0%
from 76.1% in June, but is up from 75.8% a year ago. The percentage
of college grads with jobs was fell to 72.7% from 72.9% last month
but up from 72.3% a year ago.
The graph 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 14.8% up from 14.6% in July, but down
from 14.9% a year ago. This increase is bad 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, not to mention for Mom and Dad’s
sanity.
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
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 9.5% from 9.7% last month and down from 9.8% 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 15,000
workers, and have trimmed their payrolls by 345,000 over the last
year. Local government employment was down by 20,000 on the month,
and is down by 292,000 from a year ago.
The number of state employees was up 5,000 on the month and is down
by 53,000 over the last year. The return of state workers in
Minnesota who were furloughed last month over a budget impasse (now
resolved) was probably a significant factor the increase this
month.
The federal government dropped 2,000 employees on the month, and
has dropped 105,000 employees over the last year, but most of those
were temporary Census workers.
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.
Austerity and the Poor Jobs Numbers
For the overall economy, it does not matter from which level of
government stimulus or austerity comes from. The level of
government spending occurs at matters for a bunch of other reasons,
but not for macro economic impact. About a third of the ARRA was
actually sent to State and Local governments to prevent (or delay,
as it has turned out) austerity at the lower levels of government
from hurting the economy.
Clearly the spending cuts are job killers. The effect goes well
beyond the direct 345,000 jobs lost at the state and local
government levels over the last year. Those former government
workers are now out of jobs and thus spending less, depressing
private sector employment as well.
With the spending cuts agreed to as part of the debt ceiling deal,
look for even more job cuts at all three levels of government. The
number of job losses last month at the local level was revised
sharply higher, to a reduction of 49,000 jobs rather than the drop
of 16,000 originally reported.
Within local government, education jobs were down by 13.700 for the
month and are down by 194,000 over the last year, or 2.42%. 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?
There has been a theme running in the political discourse that we
must cut government spending so we can increase employment. This is
simply absurd. In what world do you increase employment by cutting
jobs? Non-education jobs at the local level -- mostly cops,
firefighters and social workers -- dropped by 6,300 on the month
and are down by 98,200, or 1.55% over the last year.
Private Sector Helping...Just Barely
The private sector added 17,000 jobs, way down from an increase of
156,000 jobs in July (revised up from 154,000). That would be an
awful rate if we were near full employment, but when we are trying
to climb out of such a deep hole, it is simply horrendous. In June,
the private sector added 75,000 jobs (revised down from 80,000, but
up from an initial read of 57,000).
The private sector job growth over the last three months is anemic,
averaging 82,600. If the economy were near the top of an economic
cycle, that would be soft, but not a disaster, but it is awful
coming out of a deep recession. The August number was far above the
consensus expectations of 75,000 private jobs gained.
This is the 21st straight month that the private sector has added
jobs, with a total increase of 1.703 million over the last year. In
a normal year, that would be a great showing, but we lost 8.75
million jobs in the Great Recession, so we still have our work cut
out for us.
The total number of jobs is still 6.806 million below the peak of
the last cycle (1/08), but is up 1.944 million above the cycle low
(2/10). Private employment is 6.440 million below the peak, but
2.398 million off the low.
Goods Producing Jobs
Within the private sector, the goods producing sector lost 3,000
jobs 42,000 jobs. In July it gained 52,000 (revised up from
42,000). In June, the goods producing sector added 16,000 jobs
(unrevised). Over the last year employment in the goods
producing sector is up 294,000.
The construction industry lost 5,000 jobs, after gaining 7,000 last
month. 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 2.202 million
construction jobs. Most of the decline, though, happened after the
overall private sector jobs peaked in January 2008, and since then
Construction jobs are down by 1.948 million, or 26.1%.
Since the peak, overall private sector employment is down by 6.440
million. In other words, this one industry is directly responsible
for 30.2% of all job losses since the start of 2008, even though it
was responsible for just 6.46% of all private sector jobs in
January 2008.
Manufacturing lost 3,000 jobs, a big slowdown from the gain of
36,000 in July (revised up from a gain of 24,000). In June, 14,000
manufacturing jobs were added (revised from a gain of 7,000).
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 January
2008, the number of manufacturing jobs was already down to 13.728
million. The low in manufacturing jobs was in December 2009 at
11.456 million, and since then we have gained back 301,000 of those
jobs. Still, relative to the start of the Great Recession
manufacturing jobs are down by 1.971 million, or 14.4%,
representing 30.6% of all private sector job losses from the
peak.
Services Sector
The service sector gained only 20,000 jobs in the month, way down
from an increase of 104,000 in July (revised down from a gain of
112,000) and from a gain of 59,000 in June (revised from 64,000).
Relative to a year ago, private service sector jobs are up by 1.415
million. Relative to the start of the Great Recession they are off
by 2.578 million.
From their 12/09 low, private service jobs are up by 2.016 million,
so they are almost halfway back. One of the biggest contributors to
service sector jobs, as always, was the health care (and social
assistance) industry which added 35,500 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
Of particular interest is the increase in temporary workers. Those
jobs rose by 4,700, up from a gain of 1,200 (revised up from a gain
of 300) in July, but that is after they fell by 7,000 in June
(revised from being down 11,600).
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 an employer 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 dip in the average work
week is not a very good sign in that regard. 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 493,300 or 27.8%, but is still 12.4%
below the level at the start of the Great Recession. The rise in
the number of temps was not large, but is a little bit of hope for
the future.
"Underemployment" Rate
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 -- jumped to
8.826 million, up 430,000 from July but down 57,000 from a year
ago.
The “underemployment rate” rose to 16.2% from 16.1% this month.
(U-6, for you wonks out there). It is still down from 16.7% a
year-ago level. 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.
The number of people who were working part time because that is
what they want to do fell by 50,000 for the month, and is down
358,000 from a year ago.
Overall Grade: D-
Overall, this was an awful report. The only thing saving it from an
F was the increase in the participation and employment rates in the
household survey. It was way worse than expected, and the worst
overall job creation in almost two years.
However, the internals of the report were not quite as awful as the
headline job creation, or lack thereof, suggests. The redeeming
numbers all come from the separate household survey, and that is
generally considered to be less accurate than the establishment
survey.
Year over year, the drop in the unemployment rate from 9.6% to 9.1%
looks like progress, but it is an illusion. It is all due to a fall
in the participation rate. While it did tick up this month, last
month was the lowest level since 1983. Anyone who gets excited
about the drop in the unemployment rate that comes due to a falling
participation rate is deceiving themselves.
The rising participation rate this month is a good sign for the
economy, but being one tick off of a 28-year low is not something
to get very enthusiastic about. Similarly, the percentage of people
actually working ticked up, but off of the worst showing since
1983.
The drop in government jobs was actually smaller than the consensus
expected, but the downward revisions to July were big. Add those to
the drop this month and things were worse than expected. The
household survey was much more upbeat, and pointed to a gain of
331,000 jobs for the month.
However, the year-over-year showing in the household survey is much
weaker than in the establishment survey, showing the addition of
just 360,000 jobs. All things considered, it is better to see the
job creation in the private sector, but those public sector jobs
are held by real people.
Wal-Mart (WMT) does not
ask if you are in the public or private sector at the checkout
counter. The loss of those local government jobs has been a serious
drag on job creation and thus the overall economy.
The damage done by this downturn was far deeper and more extensive
than in those downturns. The next graph below (also from
http://www.calculatedriskblog.com/) shows just how deep and nasty
this downturn was relative to all the post-war recessions that came
before it. By this long after the previous peak in employment, in
every case but one (2001) the economy had fully recovered and had
more total jobs than when the recession started.
While clearly we have started the upturn, with or without census
hiring, it is going to take a very long, long time before we
surpass the total number of jobs the economy (both private and
government) had back in January of 2008 (137.996 million). We are
still 6.953 million lower than that level. Obviously at the August
pace of zero net jobs created, we would never get back there.
At the average pace of the last three months, it would take 199
more months, or over 16 years to get back there. Even if we can get
back to the pace we have averaged over the last year, we are still
talking about five and a half more years before we hit a new peak
in employment, and the population will continue to grow over that
time frame.
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