The Climb Gets Steeper

Working people face a fundamentally failing job market, write Michael Ettlinger and Amanda Logan, but there are fixes.

Ford employees assemble cars at the automaker's Chicago plant. Overall employment in the United States declined 159,000 jobs in September. (AP/Spencer Green)
Ford employees assemble cars at the automaker's Chicago plant. Overall employment in the United States declined 159,000 jobs in September. (AP/Spencer Green)

Today’s news from the Bureau of Labor Statistics should erase any doubts that the U.S. economy is in trouble, that the problems in the credit markets are finding their way into everyday life, and that further action needs to be taken to address those problems. Employment declined by 159,000 jobs in September, the largest single month drop since the current period of job loss began—a drop that has cost us 760,000 for the year. For 2008, the economy has now lost 760,000 jobs.

Amid this dramatic decline in jobs, the average hourly earnings in the private sector did edge up 3 cents in September, to $18.17. But average weekly earnings declined by $0.81 for the month, dropping to $610.51 from $611.32. With an unemployment rate at 6.1 percent for the second consecutive month, a mark previously last hit in 2003, earnings losses are to be expected. A year ago, in September 2007, the unemployment rate stood at 4.7 percent. The unemployment rate for people ages 35 to 44 (both sexes) increased to 5.2 percent last month, up from 4.9 percent in August, and considerably higher than the 3.4 percent it stood at in September 2007. The unemployment rate for men ages 35 to 44 jumped to 5.6 percent last month from 4.9 percent in August, and well above the 3.3 percent experienced a year ago in September 2007.

Workers who lost their jobs are having a hard time finding new ones in today’s harsh economic climate, as evidenced by periods of unemployment lengthening. The average duration of unemployment was 18.4 weeks in September, up from 17.4 weeks in August and 16.6 weeks a year ago. The median duration of unemployment also jumped a full week in September, to 10.2 weeks from 9.2 weeks. What’s more, the percent of unemployed people who have been unemployed for 27 weeks or longer stood at a troubling 21.1 percent in September, up from 19.5 weeks in August, and well above the 17.6 percent who had been unemployed for 27 weeks or longer last September.

Job losses continued to spread throughout the economy in September, leaving education and health services, and natural resources and mining, as the only two private sectors left unscathed. Additionally, while the government added 9,000 jobs, local government, excluding education, lost 16,000 jobs. This may be the leading edge of big problems at the state and local level, as the consequences of the economic downturn crimp tax revenues and the credit crisis puts a squeeze on borrowing for infrastructure projects and routine short-term uses (across a budget year tax revenues and spending needs do not always coincide).

The effects of the mortgage market mess are still reverberating in the construction sector, which lost 35,000 jobs in September. These losses brought the total for this year to 340,000, and the total number of jobs lost during its 15-month losing streak to 531,000. Construction has lost jobs in 20 of the past 24 months, for a total loss of 607,000.

The financial activities sector, which has received a great deal of attention over the past several weeks, registered its troubles, too. The sector lost an additional 17,000 jobs in September and has been losing jobs for over a year now. With the exception of March, when employment was stable, the financial services sector has had 14 straight months of declining employment, for a total loss of 147,000 jobs.

The professional and business services sector also took a notable hit in September, losing 27,000 jobs. There were 24,100 fewer jobs in temporary help services, a sign that even temp jobs are becoming a harder option to come by in today’s weak labor market.

With the vast majority of the government stimulus checks now cashed, the retail sector is certainly feeling the effects of the weakness in the rest of the labor market and the economy overall. Retail trade lost an additional 40,100 jobs in September, which is its largest loss since the mailing of the stimulus checks. To date, this sector has lost 250,900 jobs in 2008, and a total of 276,200 jobs since it began its losing streak in December 2007.

Another sector feeling the impact of economic weakness is leisure and hospitality, which lost 17,000 jobs overall in September. Every single sub-sector of this sector, which includes arts, entertainment, and recreation businesses, along with accommodation and food services, experienced a decline last month.

The manufacturing sector continued its fall, losing 51,000 jobs in September, to bring its total job loss in 2008 to 392,000. This sector has been faltering for more than two years, with 27 consecutive months of decline totaling 820,000 jobs. Manufacturing was already a cause for deep concern, but with other indicators showing sector output declining, credit for major purchases drying up, and world demand for goods falling, this is likely to get worse before it gets better.

The increase in the rate of job loss may well be rooted in credit market tightening. The hope is that congressional action today on the $700 billion financial rescue package will resolve the liquidity, confidence, and credit issues at hand. That may dampen the rate of decline in jobs, but it’s not going to turn things around. Much more needs to be done to address the far-reaching effects that the mortgage market mess and subsequent financial market turmoil have had on America’s workers—as well as problems that pre-dated these crises.

Long before President George W. Bush’s financial rescue bill was considered—in fact for much of the current business cycle—the labor market had been disappointing, and much more so since the start of the year. As today’s dismal employment numbers indicate, there is an urgent need for further action. Immediately, action should include measures aimed at both the short term and medium term. If other recessions are a guide, job losses can be expected for many more months. And, while for most of this year the economy seemed to be teetering, with some signals of a bounce-back and some of a further decline, as of now signs point to an extended period of weakness.

Further action is critical to restore the housing and mortgage sector. The rescue plan before Congress, whatever its merits in addressing the instant problems in the credit market, does not effectively address the value of the underlying assets that got this problem rolling. As CAP has outlined, creating a mechanism that ensures the restructuring of home mortgages to help homeowners, but most critically, to restore value to the economy, is a vital step to get the economy moving.

Then there’s the need for a second economic stimulus package. There are a set of policies, detailed here, which would help stimulate the economy and stem the tide of job loss. Among them:

  • Creating jobs by jump-starting our transformation to a low-carbon economy. The CAP Green Recovery proposal would create 2 million jobs over two years by investing in six green investment areas.
  • Investing in infrastructure. Investment in highways, roads, and mass transit would be a robust source of jobs.
  • Expanding unemployment insurance. With only 37 percent of jobless workers qualifying for benefits, and periods of unemployment getting longer, Congress should temporarily increase unemployment insurance and extend coverage for those who will not get it otherwise.
  • Increase energy assistance. With cold weather approaching, Congress should provide expanded funding to the Low Income Home Energy Assistance Program.
  • Expanding Medicaid aid to the states. As more people lose jobs and income, more people qualify for Medicaid, but states have often scaled back on the program because of their budget crises. A proactive Medicaid policy would help preserve health coverage, jobs, and state financial stability—all of which will help an economic recovery.
  • Boosting food stamp support. Low-income families are particularly vulnerable to a weak job market and boosting food stamps both helps those families and provides a mechanism for quickly boosting spending in the economy.

Congress should begin work on such a stimulus package as soon as possible. And U.S. Treasury Secretary Henry Paulson should immediately get to work helping struggling homeowners (and the communities they live in) cope with the cascading housing crisis under the authority now granted him.

Michael Ettlinger is Vice President of Economic Policy at the Center for American Progress. For more information on our policy recommendations highlighted in this column please go to the Economy page and Energy and Environment page of our website.

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.


Michael Ettlinger

Vice President, Economic Policy