|
Mounting recessionary signs as unemployment rate spikes
|
Traven
|
Jun 09, 2008 09:09 PDT
|
Mounting recessionary signs as unemployment rate
spikes
by Jared
Bernstein with research assistance from James Lin
The nation's job market showed clear signs of recessionary conditions as
the jobless rate leapt up a half percent in May, from 5.0% to 5.5%,
according to today's report from the Bureau of Labor Statistics. This
monthly increase was the largest since the mid-1980s, pushing
unemployment to its highest rate since late 2004.
Payrolls contracted for the fifth month in a row, down 49,000 with most
of the net job losses occurring in the construction industry, factories,
offices, and retailers. Since total payrolls (public and private sector)
peaked last December, they are down by 324,000 jobs. Since the government
sector tends to be less cyclically affected by downturns, looking at just
private-sector job loss can provide a more accurate gauge of the lagging
economy's impact on job growth; private-sector employment has fallen over
the past six months by 411,000.
Although single month jumps in unemployment data should be judged
cautiously, various factors suggest the spike in unemployment is not
likely to be a statistical aberration and instead accurately reflects the
weakening job market. First, it is consistent with the steady loss of
jobs in the more accurate payroll survey. Second, as noted by the
commissioner of the BLS, "The over-the-month jump in unemployment
reflected additional workers who had lost their jobs as well as an
upsurge in new and returning jobseekers."
This latter point is important. The labor market expanded sharply last
monthup over 500,000and, in a very typical recessionary scenario, when
jobseekers enter a labor market that is contracting, unemployment rises.
This dynamic also contributed to a jump in the share of long-term
unemployed, from 17.8% last month to 18.3% in May.
An increase in the youth labor force played a role in May's unemployment
spike. However, even if we take teenagers out of the data, unemployment
still rises from 4.5% to 4.8%, a considerable 0.3% increase, and well
above the 4.0% adult rate of one-year ago.
The BLS reports that the number of unemployed grew by over 800,000 last
month, but such monthly data can be too "noisy" to give a clear
signal of the growth in the number of jobless. Averaging over the past
three months, and comparing this to an average over the same three-month
period a year ago, shows that number of unemployed is up by 1.2
million.
The unemployed are but a subset of workers who are unable to find the
type of jobs they seek, especially when the job market is weakening. As a
result, the BLS also publishes an underemployment measure that
captures the officially jobless plus a variety of other underutilized
workers, most notably those part-timers who would prefer full-time work,
a group that is up 760,000 over the past year. The underemployment rate
hit 9.7% last month, up from 8.3% one year ago.
Most industries shed jobs last month, with losses continuing in
manufacturing (-26,000), construction (-34,000, both residential and
non-residential), retail trade (-27,000), and professional services
(office jobs, down 39,000). The loss in professional services was
dominated by a loss of 30,000 jobs in temp work last month, and 150,000
over the past year. The loss of temp jobs is often a bellwether in a
recession as employers shed these workers first.
Health care continues to be the one solidly reliable sector, bucking the
cycle and adding 34,000 jobs last month. The public sector, typically
counter-cyclical, added 17,000 jobs in May, all at the local
level.
Hourly earnings were up 3.5% over the past year, the same annual growth
rate as last month, and the slowest since February 2006. Given stagnant
growth in hours worked, weekly earnings grew less, up 3.2% over the year.
Since inflation is running at around 4.0%, this implies continued losses
in the buying power for most workers.
Whether or not we are in the midst of an official recession, the nation's
economy has been growing well below its potential for the past six
months. Even with the stimulative boosts from Federal Reserve interest
rate cuts and fiscal stimulus (rebate checks, which are yet to be felt in
the job market), this weak growth period has led to a protracted loss of
jobs, and as of last month, a sharp spike in joblessness. Almost 10% of
the workforce is unemployed or underemployed. Long-term unemployment is
high, as job losses make it particularly tough for the jobless to leave
the unemployment rolls. Weekly earnings, reflecting both slower hourly
wage growth and diminished weekly hours, are falling well behind
inflation.
These recessionary conditions in the job market are hurting the living
standards of working families and call for a renewed response from policy
makers. The first order of business must be to ensure a durable safety
net to catch the rising number of persons stuck in unemployment by
extending unemployment insurance benefits.
he Economic Policy Institute JOBS PICTURE is published each month upon
release of the
Bureau of Labor Statistics' employment report.
EPI offers same-day analysis of income, price, employment, and other
economic data released by U.S. government agencies. For more information,
contact EPI at 202-775-8810, or visit us on the Web at
www.EPI.org.
Copyright ©2008 Economic Policy Institute.
********************************************************************************
Traven Leyshon, Director
High Road Vermont, Ltd.
55 E. Bear Swamp Rd.
Middlesex, VT 05602
tel: 802-522-3484 (cell)
website:
http://www.highroadvermont.org/
blog:
http://highroadvt.blogspot.com/
email: in-@highroadvermont.org
Equal Time Radio
WDEV 550AM/96.1FM - 244-1777 or 1-877-291-8255
Mon-Thurs 1-2pm
http://www.equaltimeradio.com/
Have a show idea, email:
in-@highroadvermont.org
Missed our show? Find the audio from past shows at
http://www.equaltimeradio.com/
********************************************************************************
High Road
Vermont - serving those who want to
understand the world in order to change it.
|
|
 |
|
