Laboring Toward Recovery

The latest news about job figures is bad news that is better than expected, writes David Madland. The good news is the Recovery Act is working.

Workers at a decontamination site in Venice, LA, carry an oil containment boom that was used to clean up the spill on May 4, 2010. Many organizations are calling for volunteers to help in the clean-up effort. (AP/U.S. Coast Guard, Petty Officer 3rd Class Patrick Kelley)
Workers at a decontamination site in Venice, LA, carry an oil containment boom that was used to clean up the spill on May 4, 2010. Many organizations are calling for volunteers to help in the clean-up effort. (AP/U.S. Coast Guard, Petty Officer 3rd Class Patrick Kelley)

The U.S. economy shed 247,000 jobs in July. That’s the bad news. The good news is the number of jobs lost was the fewest in 11 months, and the unemployment rate fell slightly—the first decline in 15 months—providing workers with some needed, relatively good news.

The jobs numbers released today by the Department of Labor show the economy is still in very bad shape, but the report of slowing job losses, when combined with last week’s news of a better-than-expected economic decline of only 1 percent in the second quarter of the year indicates that the American Recovery and Reinvestment Act is beginning to have a positive impact. The road ahead is still long and steep, but the recent news should put some spring in workers’ steps as they go about their jobs or continue to look for work.

The unemployment rate fell to 9.4 percent in July, down from 9.5 percent in June, according to the Department of Labor report. Unemployment decreased for most demographic groups, including men and women, whites and blacks, and across all education levels. Hispanic unemployment increased by 0.1 percent, but is down 0.4 percent from two months ago. We cannot make definitive statements based on one-month changes, but this provides some optimism that the unemployment picture will improve in the months to come.

In another good sign, the average number of hours worked inched up slightly in July to 33.1 per week from 30.0. Not only is this good for those currently employed, but it may indicate that employers are starting to use some of the slack in the labor market because they typically increase work hours before hiring additional workers.

The pace of job losses has slowed across most industries, and there were slight hiring increases in health care, government, and hospitality. Overall, job losses for May through July are about half of what they were from November to April. Still, the report indicated that the labor market continues to be the worst since the Great Depression.

The American people need to understand it will take quite some time to recover from the Great Recession that began in the last year of the Bush administration. The U.S. economy has shed jobs for 19 consecutive months, the worst-ever period during the more than 70 years that the Bureau of Labor Statistics has kept these records. Since the start of the current recession in December 2007, employment has fallen by 6.7 million.

Similarly, over the past 12 months, more than 5 million additional people have become unemployed—more than any other year since the Bureau of Labor Statistics began tabulating this data. And there are now a total of almost 15 million people unemployed—more than at any other time on record in absolute numbers. The unemployment rate is the highest it has been since 1983.

And those who are unemployed are having a very hard time finding new jobs. A record 4.9 million people have been unemployed for more than 27 weeks. And the percentage of unemployed people who have been without a job for over six months is also at a record high of 33.8 percent, despite the fact that employers have been shedding jobs over the past few months.

With so many new workers laid off, the high share of long-term unemployed is striking. New increases in unemployment ordinarily reduce the percent of the unemployed who have been without a job for more than six months. But in this recession, those who have been out of work for a long time are having great difficulties finding work.

There are nearly six unemployed workers for every new job. What’s worse, this underestimates the scope of the problem since people are continuing to exit the labor market. The size of the labor force fell by 422,000 for the month, as did the employment-to-population ratio—to 59.4 percent from 62.3 percent a year ago—all signs that people are getting discouraged and leaving the workforce.

Nine million people now depend on unemployment insurance, with payments averaging just $300 per week. The American Recovery and Reinvestment Act provides full funding for an additional 13 weeks to 20 weeks of extended unemployment benefits for those in states with high unemployment. The program is providing benefits to workers in over 20 states and helping more than 2 million workers this year.

Still, only half of all unemployed workers have received any unemployment compensation over the past year. This indicates that even the extended benefits will be insufficient for helping many families. In addition, an estimated 540,000 Americans will exhaust their unemployment benefits by the end of September 2009, and another 1.5 million will run out of benefits by the end of the year, according to a recent National Employment Law Project report .

Additional efforts to extend and improve unemployment insurance clearly are needed.

Among adult men, the unemployment rate is higher than it has been in any month since the Great Depression (with the exception of last month) and is now 9.8 percent. And the share of men with a job continues its record-breaking downward march—only 67.6 percent of adult men were working in July. Prior to this recession, the share of men with a job had never fallen below 70.5 percent—a record set in 1983.

In addition, while last week’s U.S. gross domestic product figures were better than expected—a decline of only 1 percent for the second quarter of 2009 compared to a 6.4 percent decline for the quarter before that—those GDP figures also indicate that the economy was in worse shape than previously known. The revised GDP statistics show that the actual decline in GDP growth in the third and fourth quarters of last year as the Bush administration wound down its stewardship of the economy was about twice as large as the preliminary estimates we had at the time indicated.

So what’s in store for the rest of the year and into 2010? Even if the recession has hit bottom, job growth usually lags behind by many months. The unemployment rate peaked 15 months after the bottom of the 1990-91 recession, and 19 months after the bottom of the 2001 recession. That’s the bad news going forward.

But the good news is that the American Recovery and Reinvestment Act is beginning to pump money into the economy—$100 billion has already been spent to help boost GDP growth and slow job losses, but job growth will take more time. The Recovery Act provided $787 billion of tax cuts and government spending, or roughly 5 percent of GDP, making it the boldest countercyclical fiscal stimulus in U.S. history. The move was essential to prevent the economy from deteriorating even more than it has and is now playing a key role in getting the economy back on track. But it is going to be a long and slow road back for workers.

David Madland is Director of the American Work Project at the Center for American Progress. To read more about the Center’s labor policy recommendations and analysis please go to the Labor Market page on our website.

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David Madland

Senior Fellow; Senior Adviser, American Worker Project