Nine years of job growth wiped out

Economic Policy Institute

Jobs Picture for July 2, 2009
By Heidi Shierholz 07-02-09

Jobs Picture for July 2, 2009

Nine years of job growth wiped out

by Heidi Shierholz with research assistance from Kathryn Edwards and Andrew Green

This morning’s employment report from the Bureau of Labor Statistics marked a year and a half of job loss and showed that the economy shed another 467,000 jobs in June. Since the start of the recession, the labor market has lost a total of 6.5 million jobs, down from 138.2 million in December 2007 to 131.7 million in June. As the chart below shows, the peak number of jobs after the expansion of the 1990s was 132.5 million jobs in February 2001. We are currently 838,000 jobs below that figure. In fact, the entire growth in jobs over the last nine years has now been wiped out — the economy currently has fewer jobs than it had in May 2000 (when there were 131.9 million jobs). And importantly, this decline was not occurring because the jobs weren’t needed — the labor force has expanded by 12.5 million workers since then, as the population continued to grow. This is the only recession¹ since the Great Depression to wipe out all jobs growth from the previous business cycle, a testament both to the enormity of the current crisis and to the extreme weakness of jobs growth over the business cycle from 2000 to 2007.

Furthermore, the loss of 6.5 million jobs over the 18 months of this recession dramatically understates the hole in the current labor market. To keep up with population growth, the economy needs to add around 127,000 jobs every month, so the labor market needed to grow 2.3 million jobs over this period. All told, the labor market is currently 8.8 million jobs below where it would need to be to maintain pre-recession employment levels. If there is any good news in this report, it is that despite the increase in job loss from May, the pace of losses still appears to be slowing from the enormous declines of earlier this year. In the first quarter of 2009, the economy shed 691,000 jobs per month, on average, but in the second quarter the losses averaged 436,000 jobs per month.

The continued losses, however, mean unemployment is still rising. This recession has set a new unemployment benchmark as unemployment has increased by 4.6 percentage points, higher than the rise of unemployment in the 1980s recession. Unemployment rose from 9.4% in May to 9.5% in June as 218,000 people were added to the jobless rolls. One of the reasons the unemployment rate did not rise more than it did in June was due to a shrinkage of the labor force of 155,000 workers, partially offsetting the labor force gain in May of 350,000 workers. There are now 14.7 million unemployed workers in this country, up 7.2 million from the start of the recession. The picture changes dramatically, though, when considering the broader measure of underemployment. If the ranks of the “marginally attached” (jobless workers who want a job but are not actively seeking work and so are not counted as officially unemployed) and “involuntary part-time workers” (those who want full-time jobs but can’t get the hours) are added to the mix, the figure rises to 25.9 million, which means nearly one in six U.S. workers (16.5%) is either un- or underemployed.

Furthermore, with less than one job opening for every five job seekers, unemployed workers are getting stuck in unemployment for long periods. In June, 4.4 million people, 2.8% of the labor force, had been unemployed for at least six months, surpassing the record high of 2.6% set in the early 1980s. While today’s overall unemployment rate has not reached the peak rate of the early 1980s, the rate languishing in long-term unemployment has. Another new record: currently 29% of unemployed workers have been jobless for over half a year.

While all groups have experienced large increases in unemployment during this recession, some are feeling the effects of the downturn more than others. In June, unemployment was 14.7% among black workers, 12.2% among Hispanic workers, and 8.7% among white workers (increases of 5.8, 6.0, and 4.3 percentage points, respectively, since the start of the recession). Male unemployment increased to 10.6% in June, compared to 8.3% for women (increases of 5.6 and 3.5 percentage points). For workers with a college degree, the unemployment rate is 4.7%, and unemployment among those with only a high school diploma, at 9.8%, is more than double that of college-educated workers. Workers with less job experience are also particularly hard hit — those age 16-24 face an unemployment rate of 17.8%; 25-54 year olds are seeing 8.5%; and those over 54 are at 7% (up 6.2, 4.5, and 3.9 percentage points, respectively, since the start of the recession).

Wage growth, which held up for the first year of the recession, has collapsed over the last six months. In the second quarter of 2009, nominal hourly wages of production workers grew at a 0.7% annualized rate, which is only one-sixth of the 3.9% growth rate from December 2007 to December 2008. And as workers have seen their hours cut back, nominal weekly earnings have actually fallen, declining at a -0.6% annualized rate in the second quarter. Along with undercutting the living standards of workers, the collapse of wage growth puts further downward pressure on the overall economy by constraining the growth of consumption.

Manufacturing and construction saw big employment losses in June, as has been the case throughout the downturn. Manufacturing saw a decline of 136,000 jobs last month, (most of that — 112,000 — in durable goods manufacturing) for a total drop since December 2007 of 1.9 million, or 14.0% of that sector’s employment. June’s decline, however, was smaller than the average loss of 182,000 jobs per month for the prior six months. Construction saw a decline of 79,000 jobs in June, for a total of 1.3 million jobs lost in this recession (17.1% of employment). This was a larger decline than May’s (which was 48,000), but significantly smaller than the average of the prior six months (which was 103,300).

Another sector that saw a big loss in June was professional and business services, losing 118,000 jobs after declining only 48,000 jobs in May. The federal government lost 49,000 jobs in June, mostly due to layoffs of temporary workers hired for preparations for the 2010 Census. State governments lost 4,000 jobs, and local government employment remained basically flat, adding 1,000 jobs. Education and health services added 34,000 jobs in June, the only major sector that saw growth.

Rapid declines continued in the index of aggregate weekly hours — a measure of the total number of hours worked in the economy and thus a more comprehensive measure of the economic contraction than employment because it captures both job loss and reductions in hours for workers who kept their jobs. It fell 0.8% in May (an annualized rate of 9.2%), for a total of 8.2% since the start of the recession, a substantially larger fall than in earlier recessions.

The June employment report shows that while the pace of losses is stabilizing, the U.S. labor market is still losing jobs at a stunning rate, and unemployment continues to rise. It is important that the relatively good news of the stabilizing pace of job loss does not overshadow the fact that the economy continues to shed hundreds of thousands of jobs per month and the pain in the real economy is deepening. Unemployment will almost certainly pass 10% by the end of the year; the economic case for additional policy interventions to generate jobs and to assist those adversely affected by the recession keeps growing stronger. It is apparent that, despite the substantial positive impact of the February recovery package, the economy’s dramatic deterioration from November to March was even greater than anticipated. Clearly, more work needs to be done to mitigate further damage.

Note
1. This counts the “double dip” recession of the early 1980s as one recession.