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Job Growth Still Overwhelmed by Severe Unemployment

SOURCE: AP/LM Otero

Job seekers line up to meet prospective employers during a career fair at a hotel in Dallas on Wednesday, January 22, 2014.

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This column was originally published on MarketWatch.

Today’s employment situation report from the Bureau of Labor Statistics, or BLS, confirms that underlying economic trends—not bad weather in December and January—continue to hold back the U.S. labor market. U.S. employers added 113,000 jobs in January, which followed the 75,000 new jobs added in December.

This fragile recovery six years after a severe economic shock results from policies that choose fiscal austerity over job creation and investments in growth—a choice made again yesterday when Senate conservatives filibustered a bipartisan effort to renew emergency unemployment benefits for people who have been looking for work for more than six months. Because of this congressional inaction, 1.7 million—and counting—long-term unemployed job seekers will lose emergency unemployment insurance benefits, a policy that would add 0.2 percent to gross domestic product, or GDP, growth and 200,000 jobs to the economy this year, according to the Congressional Budget Office. In January, 36 percent of workers counted as unemployed had been out of work for 27 weeks or more, with little improvement from one year ago, according to today’s report.

Job growth continues to move in the right direction, but not fast enough to solve America’s ongoing unemployment crisis—a fact that should give pause to Federal Reserve governors contemplating pulling back on monetary stimulus to the economy. The number of workers measured as unemployed remained basically unchanged in January at 10.2 million, and the unemployment rate notched down to 6.6 percent, though this was not a statistically significant change.

These headline unemployment numbers grossly understate the severity of the problem. Today’s data show that since the labor-market recovery began in February 2010, more than 1.7 million workers have stopped “participating” in the labor force—a technical term used in calculating the unemployment rate that excludes those willing and able to work but not actively seeking a job. In reality, these people are not choosing leisure over labor; they are frustrated with the futility of looking when there are three unemployed people for each job opening, according to separate data from the BLS. Factoring in these disguised unemployed workers would result in an unemployment rate estimated at more than 10 percent.

Worker sentiment on the state of the labor market can be seen in today’s report in data that illustrate reasons for unemployment. The number of people that reported having lost a job involuntarily increased, while the number that reported leaving a job voluntarily and the number re-entering or rejoining the workforce declined. Although the overall unemployment rate remained basically unchanged, unemployment for historically disadvantaged groups worsened in January. The unemployment rate for African Americans rose 0.2 percentage points to 12.1 percent, and the rate for Latinos rose 0.1 percentage points to 8.4 percent. The unemployment rate for youth ages 20 to 24 rose 0.8 percentage points to 11.9 percent.

The establishment survey of employers in today’s report is rather devoid of signs that job growth will accelerate substantially in the near future. Temporary employment services, often a stepping stone to permanent future employment, added just 8,000 jobs in January. The average work week remained unchanged at 34.4 hours, and overtime hours notched down to 3.4 percent, meaning that employers have considerable room to increase worker hours before they need to hire additional people.

On a positive note, the long-beleaguered manufacturing and construction sectors led overall employment gains in January, adding 21,000 and 48,000 new jobs, respectively. Health care and social assistance, a sector that has delivered steady gains throughout the Great Recession and the recovery, posted gains of a mere 1,500 jobs. But the continued bleeding of public service jobs at all levels of government held back the overall labor market recovery. Despite substantial improvements in budgetary conditions at the national level and in many localities, the public sector in total shed 29,000 workers in January, including 14,000 teachers and education professionals.

Unfortunately, lawmakers do not seem to have learned the lesson that weak job growth and persistently high unemployment should teach. The crusade to cut spending has undermined families’ financial security, shrunk the markets for business sales, and deterred the public and private investments that make businesses and people more productive and innovative, leading to stronger growth over the long term. These obstacles to a more robust economy result from policy choices, not economic laws of nature.

Adam S. Hersh is a Senior Economist at the Center for American Progress.

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