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A Good Job Is Hard to Find

SOURCE: AP/Tony Dejak

Maureen Sanders looks for postings at the Employment Connection in Parma, Ohio. Sanders, currently unemployed, is a recent graduate and is looking for a job as a dental assistant.

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The latest U.S. jobs figures reveal that the unemployment rate shot up to 9.7 percent in August, with job losses continuing, but at a more moderate pace than last winter. In August, the economy shed 216,000 jobs, about a third as many as had been let go in the winter months during the depths of the current recession.

The slowing in the pace of job losses is encouraging, but the pain of the recession remains acute. The economy continues to shed jobs each month, which combined with the sheer numbers of unemployed means that millions of idled workers are on the sidelines waiting for a recovery to dip their toes back into the job market..

Since the recession began in December 2007, the number of workers on a payroll has fallen by 6.9 million. The Department of Labor’s Bureau of Labor Statistics continues to revise job losses downward each month: June’s data was revised downward by 20,000, to 463,000 jobs lost, and July’s was revised downward by 29,000, to 276,000 jobs lost. As of August, 14.9 million workers are now unemployed.

Job losses occurred across all industries except health care and education. Construction shed 65,000 jobs in August, about half as many as were lost each month between November 2008 and April 2009, but still a significant decline. Following the collapse of the housing bubble, job losses had been concentrated in residential construction. So far, residential construction has lost one-third (32.7 percent) of its total employment since its employment peaked in April 2006. Now, however, job losses are mostly in non-residential construction, which has lost 13.9 percent of its employment since its peak in March 2008.

This may mean we’ve hit bottom in terms of the fall-off in residential construction. But this does not mean that things are improving. Unemployment among workers in the construction industry is 16.5 percent higher than any other industry.

Elsewhere in the economy, health care continued to add jobs, but the pace of job gains has slowed in 2009 compared to 2008. The government sector shed 18,000 jobs last month, for a total of 69,000 over the past year

The economic recovery package passed by Congress and signed into law by President Barack Obama earlier this year is helping to slow the pace of job losses. While families have been seeing lower taxes for months now, funds are now making their way into the projects in communities around the country. Recovery dollars in the cash for clunkers program and first-time homebuyers’ credit are helping to spur spending on big-ticket items.

A key component of the recovery package is providing benefits to the long-term unemployed, which not only help workers avoid hardships, but also provide the “biggest bang for the buck” in terms of economic stimulus. Typically, a worker can receive unemployment compensation for six months and the recovery package extended up to 50 weeks of benefits to those unemployed longer than 26 weeks. Even so, more than 500,000 workers will exhaust these benefits this month. And an additional million will exhaust their long-term benefits by the end of the year.

These workers will have completely run out of all additional weeks of benefits, but the dismal labor market has prevented them from finding a new job. Focusing on the long-term unemployed is urgent because the challenges of those out of work remain significant—more so than in any prior recession. Once workers lose their job, it continues to be extremely difficult to get back into the workforce. The typical worker is now spending 15.4 weeks unemployed, which means that one-half of workers are finding a job in less time, but one-half are taking longer—often much longer—to find a new job. The median weeks of unemployment is more than three weeks longer than the peak hit in 1983, in the depths of the early 1980s recession, when the typical worker was unemployed for 12.3 weeks.

Fully one-third (33.3 percent) of those out of work are “long-term unemployed,” or out of work and searching for a job for at least six months. Prior to this spring, the share of the unemployed who were long-term unemployed had never risen above 26.0 percent, the height hit in 1984 (since 1948 when the BLS began collecting data). That the share of the unemployed who are long-term unemployed has been so high since April of this year is especially striking because record numbers of workers lost their job this winter and spring, which should have increased the share of newly unemployed relative to the long-term unemployed.

Further, among those out of work, two-thirds (65.3 percent) are those who have lost their job, while the remaining one-third are either new labor market entrants, such as high school graduates just starting to look for work for the first time, or those reentering the labor force, such as a former stay-at-home mother trying to get back into the workforce. The share of the unemployed who are “job losers” is higher than in any prior recession. A record 9.8 million of the total 14.9 million unemployed workers are out of work because their lost their prior job.

The good news is that those who are employed continued to see wage growth after inflation. Wages grew by six cents in August and the average quarterly rate of annual wage growth was 1.8 percent. Since inflation is falling, real wages are actually higher than this: From July 2008 to July 2009, the nation’s consumer price index (urban wage earners and clerical workers) declined by 2.4 percent. Still, cutbacks in hours are limiting worker’s take-home pay. Weekly earnings have increased at an average quarterly annualized rate of 1.4 percent.

A clear policy goal should be to ensure that those who have been hardest hit by this recession are able to receive unemployment compensation to help them as they search for employment, even if they are unemployed for a significant period of time. There are bills in both the House of Representatives (H.R. 3404) and the Senate (S. 1647) to extend benefits to the long-term unemployed. Both bills include extending the key provisions from the recovery package, which will expire at the end of December, as well as adding an additional 13 weeks of benefits on top of the additional weeks that were in the recovery package.

These steps would help those exhausting their long-term benefits this fall and help the economy recover, too, by pumping dollars into communities hit hard by the recession. Our labor markets are clearly still recovering from the excesses of the Bush administration years even though the 2009 economic stimulus package is beginning to pay dividends in the broader economy. Until the job markets recover, Congress needs to extend unemployment benefits.

Heather Boushey is a Senior Economist at the Center for American Progress. For more on this topic, please visit our Economy page.

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