Recession Still Plagues Workers

The latest job numbers show the depths of this 17 month-long recession and indicate that economic recovery may be months away, writes Heather Boushey.

Job seekers fill out job applications at one of the company booths at the Mayor's Youth Jobs and Opportunities Fair on April 23, 2009, at the convention center in Cincinnati. Minority workers, teens, and less-educated workers have unemployment rates far higher than the national average. (AP/Al Behrman)
Job seekers fill out job applications at one of the company booths at the Mayor's Youth Jobs and Opportunities Fair on April 23, 2009, at the convention center in Cincinnati. Minority workers, teens, and less-educated workers have unemployment rates far higher than the national average. (AP/Al Behrman)

The U.S. labor market remains mired in recession: Employers shed another 467,000 jobs last month; the unemployment rate now stands at 9.5 percent; the economy has lost a record 5.7 million jobs over the past year and 6.5 million since the recession began in December 2007. The breadth and depth of the current recession point towards the continued necessity of spending the recovery dollars to get people back to work.

The underlying news in today’s report, however, is that unemployment remained little changed because so many workers exited the labor force. In June, 358,000 workers reported exiting the labor force, nearly as many as the 374,000 who reported losing a job. This is an indication of the frustration that many are experiencing in trying to find employment—they are simply giving up. The number of discouraged workers has more than doubled to 793,000 since the recession began in December 2007. Indeed, the number of workers who reported being unemployed in May but then out of the labor force in June is 2.6 million—higher than at time since 1990. The share of the population with a job fell to 59.5 percent, the lowest since 1984.

There continues to be evidence that there is more pain down the pipeline. In May, the number of mass layoffs—an announcement of 50 or more employees being laid off—was at an all-time high of 2,933 incidents, indicating that unemployment will continue to rise in the months to come. Some of this may be reflected in June’s employment data, but it may not account for them all if these layoffs were staggered over time. On top of this, hours fell to another historic low in June, with the average worker employed for only 33 hours per week. And the temporary help industry—an indicator of employer’s willingness to take on new workers—continued to hemorrhage jobs last month, losing another 37,600 jobs in June, indicating that employers are under no pressure to begin hiring anytime soon.

Job losses were again widespread in June, with manufacturing and construction showing the largest share of the job losses. So far over the course of this 17-month recession, these two industries have accounted for half—49.6 percent—of total job losses. Manufacturing shed another 136,000 jobs in June for a total of 1.9 million since the recession began in December 2007. There are now fewer manufacturing workers employed in the United States since anytime since 1941. Construction shed another 79,000 jobs in June and 1.3 million jobs since the recession began. The high share of job losses in these two industries explains why men have lost three out of every four jobs lost since the recession began.

Even if layoffs stopped today, the grim news for workers will not end until employers begin to hire again. But employers will not add to payrolls until they see increased demand for their goods and services from domestic or foreign consumers. As long as homeowners continue to see falling home prices and workers see higher unemployment and reduced hours, consumers will be keeping their wallets shut. Since consumer spending accounts for 70 percent of the U.S. economy, the lack of consumer purchasing power will constrain economic growth, and thus employment growth, for some time to come. And because the recession is global, it is unlikely our trading partners will be pulling us out of this quagmire anytime soon.

The American Recovery and Reinvestment Act signed into law swiftly by President Obama is designed to fill in the gap in demand by pumping billions of dollars into communities around the nation. The impact of these funds are only beginning to be felt as projects get up and running, although the tax cuts led to higher take-home pay for workers in April. So far, the Recovery Act is going according to plan—$52.9 billion has gone out the door. The largest job gains from this spending were projected to occur in the late fall through 2010, so the biggest bang is still ahead of us.

One of the biggest threats to the effectiveness of the recovery package is that states are seeing such large declines in tax revenues that they are being forced to cut back—in some cases drastically—in services. This is adding another drag onto local economies while also paring back in many cases the very services that unemployed workers and their families need access to.

Workers who have been laid off are having an exceptionally hard time finding new work. The latest data shows that there are five unemployed workers for every job available. Further, even though record numbers of workers have lost their jobs within the past six months because a new job is hard to find, the share of the unemployed who have been out of work and searching for a job for at least six months hit another all-time high of 29.0 percent. This is especially disturbing given that 3.4 million jobs have been lost within the past six months. In May, the Department of Labor reported that over the past 12 months a record average 49.2 percent of those receiving unemployment benefits exhausted their initial six months of benefits without finding a job. Because of the Recovery Act, these workers are eligible for up to an additional 53 weeks of unemployment benefits, on top of their initial 26 weeks, if they cannot find a job.

The pain of the recession is widespread, with a few demographics seeing their unemployment rates higher than at any point since the Great Depression. The unemployment rate is at an all-time high of 7 percent among workers age 55 and over, and the teen unemployment rate of 24 percent is only one-tenth of a percent shy of its all-time record set in 1982. Among adult white men, the unemployment rate is at a post-Great Depression high of 9.2 percent and the share of men with a job continues its record-breaking downward march—only 67.7 percent of adult men were working in June. Prior to this recession, the share of men with a job had never fallen below 70.5 percent—a record set in 1983.

It continues to be the case that minority workers, teens, and less-educated workers have unemployment rates far higher than the national average. In June, African-American unemployment was 14.7 percent, Hispanic unemployment was 12.2 percent, and unemployment for those without a high school degree was 15.5 percent and for those with only a high school degree was 9.8 percent. African-American and Hispanic workers saw their unemployment rates fall slightly last month, but this was associated with a decline in labor force participation so this is more an indication of how challenging the labor market is rather than a sign of improved employment opportunities.

The Obama administration’s focus on laying the foundation for long-term economic growth through policies addressing climate change, health care, and financial regulation continue to be critical for the long-term employment situation. At this point, the economy is still under the spell of the massive downward momentum that built up last year as the outgoing Bush administration did little to address the burgeoning economic challenges in the real economy.

At this point, unless we want to embark on another massive stimulus plan, there’s little we can do in the months to come to keep unemployment from rising beyond continuing to provide unemployment benefits and access to health care and other services. But, over the long term, the goal should be getting our economy back on track and growing in a sustainable fashion, while limiting the potential for this kind of finance-led crisis to happen again.

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Heather Boushey is a Senior Economist at the Center for American Progress. To learn more about the Center’s economic policy proposals go to the Economy page on our website.

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Heather Boushey

Former Senior Fellow