Bad News in New Job Numbers

Brunt of labor market slowdown in April borne by our country’s most vulnerable workers, writes Christian E. Weller

The latest job estimate numbers released this morning by the Bureau of Labor Statistics boast little good news, especially for the nation’s most vulnerable workers. The economy in April shed another 20,000 jobs, making this the fourth month in a row that employment fell. Over these past four months, the U.S. economy has now lost 260,000 jobs, and employment is lower than at any point since August 2007.

Economists continue to debate whether the current slowdown technically meets the definition of a recession, but it certainly feels like one to those in the labor market. This is especially true for workers more vulnerable to job losses as a result of swings in the economy, including workers with less than a high school education, minorities, and the young. To be sure, things are not looking rosy for anybody in the labor market right now. But for those already in a particularly precarious financial situation due to low wages, limited benefits, and high debt, the latest job figures highlight the fact that they are the first ones to feel the severe sting of a market downturn, as tends to be the case when the economy enters a period of downturn.

Before going into the demographic details of the labor market, though, it makes sense to consider the broader labor market context. Job growth for this business cycle, which started in March 2001, has been anemic to begin with. Average annualized monthly job growth has been 0.6 percent between March 2001 and April 2008—the lowest rate since World War II, and less than one-third of the long-term average before the current business cycle.

Weaknesses in employment were spread out across a wide range of industries last month. Construction lost another 61,000 jobs, manufacturing an additional 46,000 jobs, and the retail sector saw jobs decline by yet another 26,800. The main bright spots remain health care, which added 36,900 new jobs, and restaurants, where employment increased by 18,000 jobs last month.

Importantly, meager employment gains went along with flat wages. From March 2001 to March 2008, the last month for which data are available, inflation-adjusted hourly wages increased by 2.2 percent, and weekly earnings rose by 1.4 percent. Over the past 12 months, hourly earnings declined by 0.6 percent, and weekly earnings dropped by 0.9 percent, after accounting for inflation.

The weak employment growth also meant that many groups of workers never recovered the employment losses that they sustained in the last recession. The employed share of the entire population peaked at 64.3 percent in March 2001, and fell to 62.0 percent in September 2003. It rose again over the subsequent years, but peaked at 63.4 percent in December 2006. In the last business cycle this level was surpassed in September 1997, and the economy added jobs for another three-and-a-half years. Instead, in this business cycle employment opportunities disappeared as employment did not keep up with population growth. Last month, the employed share of the total population stood at 62.7 percent.

One pertinent example of this lackluster employment performance over the past few years are workers between the ages of 35 and 44, or what economists consider people in their prime working years. Their employed share stood at 82.4 percent in March 2001. It fell to a low of 79.4 percent in July 2003, before rising to its most recent peak of 81.4 percent in January 2007. By April 2008, however, the employed share of prime working age people had dropped to 80.7 percent, the lowest level since July 2007. If those who are supposed to have the best opportunities in the labor market are seeing their job chances erode, then things will likely not be much better for those with fewer opportunities.

The data bear this out. The employed share of Hispanics, for instance, dropped by 1.2 percentage points to 63.9 percent in April from 65.1 percent in April 2007. This was four times the drop for whites. The employed share of African Americans dropped by only 0.1 percentage points over the past year, but it was also substantially lower, at 8.5 percent, than the employed share of white workers (63.3 percent) or Hispanics (63.9 percent) in April of this year. That is, African Americans were already in a very precarious situation to begin with before the current labor market slump started.

What’s more, the employed share of people between the ages of 16 and 19 fell by 0.4 percentage points during the past year, to 34.7 percent in April 2008. This decrease was twice as large as the drop for people between the ages of 20 and older, for example. And, the employed share of people with less than a high school diploma declined by 0.7 percentage points during the last year, compared to a decline of 0.6 percentage points for those with a high school diploma, and an increase of 0.5 percentage points for those with a college degree.

The data indicate that the weak labor market has left virtually everybody less financially secure. Yet the brunt of the labor market slump has been borne by those who are already financially very insecure: minorities, young workers, and those with little formal education. Against the backdrop of these numbers, it is critical for policymakers to consider support measures that are targeted at the most vulnerable in our society, and that can be delivered in the most expedient way—through improved unemployment benefits and a progressive “reliefbate” for low- and middle-income Americans struggling with higher energy prices as Big Oil continues to rake in record profits.

Christian E. Weller is a Senior Fellow, Center for American Progress and Associate Professor, Department of Public Policy and Public Affairs, University of Massachusetts Boston. For more on the Center’s “reliefbate” proposal, please see our “Progressive Relief from High Fuel Prices” report.

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Christian E. Weller

Senior Fellow