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Unemployment Rises Above 10 Percent for the First Time in 26 Years

SOURCE: AP/Paul Sancya

A woman holds an Employment Guide while standing in line while attending a job fair in Livonia, Michigan.

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Unemployment rose to 10.2 percent in October 2009, the Bureau of Labor Statistics reported today. The economy shed 190,000 jobs in October for a total of 7.3 million jobs lost since the recession began in December 2007. This is the highest level of unemployment since April 1983, and there are now 15.7 million workers unemployed. BLS also reports that there were 47,000 fewer jobs lost in August and 44,000 fewer jobs lost in September than they had initially reported, which is a positive sign because it indicates that there may have been fewer firm “deaths,” or more “births,” in recent months than the BLS model had predicted, based on prior year’s data.

The good news is that the pace of job losses has slowed considerably since last winter. The economy has shed an average of 188,000 jobs over the past three months, which is about a third as many jobs lost as were lost from November 2008 to April 2009 when an average of 645,000 jobs were lost each month.

This points to the success of the American Recovery and Reinvestment Act in helping to slow the pace of job losses. The Gross Domestic Product data for the third quarter released last week provides evidence that the recession—defined primarily as a contraction in output—may have ended this summer. The economy grew in the third quarter of 2009 for the first time in five quarters, rising by an annual inflation-adjusted rate of 3.5 percent.

While there are some bits of good news buried in today’s report, the overall labor market prospects for millions of workers remain grim. Extended joblessness and low hours for those with jobs point toward continuing challenges in the labor market. If we don’t see an end to the job losses and strong gains in employment soon, the nascent recovery will have hard time gaining ground.

The federal government must continue its focus on ensuring that those out of work for an extended period of time continue to get access to unemployment benefits and are able to afford access to health insurance. Both of these programs will need to be extended beyond their December 26 expiration date. Congress and the Obama administration will also need to work on strategies for direct job creation, including funneling funds to the states to maintain employment and services.

It’s true that job losses were less widespread in October than they were last winter, but some sectors continue to see relatively sharp contractions. Construction employment fell by 62,000 in October; this industry has lost one-in-five jobs since the recession began in December 2007. Job losses caused by the collapse of the housing market have slowed, but losses are now concentrated in non-residential construction. Nearly half of the October construction losses (30,000) were in non-residential specialty trade contractors, and nearly a quarter (14,000) were in heavy construction.

Manufacturing and retail also led in job losses last month. Manufacturing shed 61,000 jobs in October, and that sector has lost over one-in-seven jobs since the recession began in December 2007. Retail trade lost 40,000 jobs last month, and has lost one-in-eight of its jobs since the recession began. Retail sales have increased in recent months, but at a relatively slow pace and, employers appear unwilling to take on new hires until consumers show a stronger or more sustained ability and willingness to spend, even with 3.4 percent consumption growth in the third quarter.

Employers need to begin hiring for this nascent recovery to hold. But there are a couple of indications that some employers are beginning to step up the pace of production. Temporary help—typically a leading indicator of employment growth—added 33,700 jobs last month, after adding 3,200 in August and 7,200 in September. Looking back over the months after the end of the 2001 recession, temporary help led overall employment growth, which indicates that the recent growth may be a harbinger of hiring yet to come.

temporary help graph

There are signs that some employers in manufacturing are seeing increased demand. Overall hours worked held steady at 33.0 per week in October, but manufacturing hours increased by one-tenth of a percent to an average of 40.0 hours per week, higher than in any month since November 2008. And manufacturing overtime rose two-tenths of a percent to 3.2 hours per week, higher than in any month since November 2008. Hours for service workers remain stuck just a tenth of a percent above their all-time low (going back to 1964).

Wages grew by a quarterly annualized rate of 2.8 percent last month, outpacing inflation, which fell by 1.7 percent over the past year. But weekly earnings have grown by less than hourly wages given declines in hours worked.

Continuing job losses and a lack of hiring are making it extremely challenging for the unemployed to get back into a job. The share of the unemployed who are “long-term unemployed”—that is, out of work and searching for a job for at least six months—remains at an all-time record high of 35.6 percent (going back to 1948). The typical worker is taking 18.7 weeks to find a new job—also a record high going back to 1948. This is over 8.5 weeks longer than it took to find a job when unemployment last peaked at 10.8 percent in November 1982.

The dismal labor market for workers is evident in nearly every series the BLS has from its household survey, which measures labor market weakness. Nearly a million workers have left the labor force over the past year; two-thirds of those unemployed are out of work because they lost their prior job, dwarfing new and returning labor market entrants; 9.3 million workers are employed part-time even though they would prefer a full-time jobs; and the share of the population with a job has fallen to 58.5 percent, lower than at any point since 1983; adult men’s employment rates fell to 66.7 percent, hitting another all-time low (going back to 1948); and teens are seeing their worst labor market ever—unemployment among 16- to 19-year-olds is a record 27.6 percent.

It remains the case that the unemployed are experiencing record-high lengths of time to find a new job, and on top of this, the labor force participation rate is lower than at any time since 1986. This indicates that there are many waiting on the sidelines not even now searching for work. Slowing job losses is certainly a positive sign, but we need strong job gains to begin to absorb all those needing a job.

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