Job Losses Continue at Accelerated Pace

New, dismal jobs data released today highlights the need for action on economic recovery, writes Heather Boushey.

People wait to talk to unemployment benefits staff at an Employment Development Department office in San Jose, California. The number of people receiving unemployment benefits has reached an all-time record. (AP/Marcio Jose Sanchez)
People wait to talk to unemployment benefits staff at an Employment Development Department office in San Jose, California. The number of people receiving unemployment benefits has reached an all-time record. (AP/Marcio Jose Sanchez)

January was a dismal month for U.S. workers: Employers shed 598,000 jobs and the unemployment rate jumped to 7.6 percent. The economy has lost 3.6 million jobs since the recession began in December 2007 and 1.8 million jobs just over the past three months. The United States has not seen job losses of this magnitude over a three-month period since 1945.

The spike in unemployment in January brings the total number of people out of work to 11.6 million—4.1 million more than a year ago. The unemployment rate has not risen this fast over a three-month period since the recession of the early 1980s, and there have only been two months since 1948 when there were more unemployed workers in the United States, both during the recession of the early 1980s.

job losses chart

Today’s data underscores the need to pass a recovery package that focuses government resources on creating or saving jobs quickly, while laying the foundation for long-term economic growth. Without a recovery package, it is clear that job losses will continue to mount rapidly.

Job losses were significant and widespread in January. The collapse of the housing bubble continues to lead to large job losses in housing-related industries. There were about 1.0 million fewer construction jobs in January compared to January 2007, when construction employment peaked, and 111,000 jobs were lost in January 2009 alone.

Employment in the financial services industry declined by 42,000 during January, and 388,000 jobs have been lost in that sector since this industry’s employment peak in December 2006. Manufacturing also lost 207,000 jobs in January—the largest one-month decline since October 1982. And retail trade employment fell by 45,100 over the month, with 592,000 total retail jobs lost since the peak in November 2007.

The one bright spot in employment continues to be in health care, which added 19,000 jobs in January. But this level of job creation is slower than was typical in 2008. Overall, education and health services added 54,000 jobs in January.

There are no indications that employers are going to hire workers anytime soon. The temporary help industry, which provides a leading indication of demand for workers, lost 76,400 jobs in January and is down by 695,000 since its peak in December 2006. Professional and business services overall lost 121,000 jobs over the past month.

The recovery package being considered by the Senate this week totals just over $900 billion and focuses on getting people back to work, while making investments that will foster long-term economic growth. The package includes $191 billion for infrastructure, green energy and science, $342 billion for tax cuts to working families and businesses, and $186 billion for the hardest hit from the recession. These investments would go a long way toward reversing some of the job losses in construction and manufacturing. As these workers get back to their jobs, they will increase demand for retail and other services, primarily in the private sector, which will stem the tide of further job losses in those industries.

Today’s data also shows that employment over 2008 was weaker than initially reported. There were 32,000 fewer workers employed per month on average last year, and the total non-farm employment level was revised downward by 385,000 workers for the year.

Weekly hours worked are at a historically low level, even as employers shed workers. The average number of hours worked held steady last month at 33.3 per week. This is fewer hours per week than at any other time since the Bureau of Labor Statistics began tracking the data in 1964. What’s more, 7.8 million workers are employed part-time, even though they would like a full-time job. Employers are reporting anecdotally that they are asking workers to take shorter hours to avoid lay-offs. Yet shorter hours or part-time work means that millions will be left without basic benefits such as health insurance coverage and paid time off, unless employers alter their usual practice of not providing benefits to part-time workers.

Real wages for those on the job have been rising due to falling prices. The quarterly average annualized rate of wage growth was 4.0 percent in January, but the Consumer Price Index fell at a 12.7 percent annual rate over the last quarter. Many workers may see that their take-home pay buys more than it did just a few months ago if this deflation continues, but the real value of their debts will rise, leaving most families no better off.

The share of unemployed workers who lost their job involuntary rose to 61.1 percent. There have only been two months since 1948—both during the recession of the early 1980s—when this share was higher.

Sharp job losses are reflected in increased applications for unemployment benefits. The Department of Labor reported earlier this week that 626,000 people applied for benefits (on a seasonally adjusted basis). This is the highest in more than 26 years.

The unemployed are finding it increasingly difficult to get back to work. The typical unemployed worker has been out of work and searching for a job for 10.3 weeks, and nearly one in four (22.4 percent) unemployed workers have been out of a job for at least six months. The problem is that there are many more job seekers than jobs to be had. There were 2.8 million job openings on the last business day of November (the latest data on job openings), but there were 10.5 million unemployed workers. In January, 6.0 million workers entered or re-entered the labor market, but less than two out of three (60.7 percent) actually found a job that month.

Unemployment is widespread, but some demographic groups have been hit harder than others. The teen unemployment rate held steady at 20.8 percent, which is as high as it has been since the recession of the early 1990s, and the unemployment rate among those ages 20 to 24 held steady at 12.1 percent, which is higher than at any point since the early 1980s.

Both men and women are having a hard time getting back into the labor market after a spell of unemployment. The share of men entering or re-entering the labor market in January who found a job was 59.8 percent, and among women it was 61.4 percent.

The share of adult men in the United States with a job is at its lowest point ever: 69.2 percent. Women’s jobs have been sustained over the past year by hiring in the government and health care sectors. Adult women’s unemployment has risen by 1.9 percentage points since the recession officially began, to 6.2 percent in January from 4.3 percent in December 2007. Adult men’s unemployment has risen by 3.2 percentage points during that same period, to 7.6 percent from 4.4 percent.

The data provide no clear indication of when job losses will begin to abate. A long list of companies announced lay-offs in January, and on January 30 alone, firms announced more than 75,000 planned lay-offs. The most recent data on the Gross Domestic Product provides only further discouraging news on future job creation. Seasonally adjusted personal consumption spending fell by 3.5 percent in the fourth quarter of 2008, while business investments dropped by 19.1 percent—the largest such decrease since the first quarter of 1975. Exports are also no longer contributing to economic growth, having dropped by 19.7 percent in the fourth quarter. The only growth the economy had came from government spending, which grew by just 1.9 percent, and a piling up of inventories, which indicates that firms will not need new hires anytime soon.

CAP on economic recovery:

Brief: Recovery and Reinvestment 101

Interactive Map: Beyond the Beltway: Helping Those Most in Need

Interactive: Build Your Own Stimulus Package

Video: How the Recovery Package Works

The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.


Heather Boushey

Former Senior Fellow