Unemployed—and Staying That Way

The grim labor market picture shows an economy mired in recession for some time to come, writes Heather Boushey.

People call an unemployment insurance hotline at the Career Link Center in San Francisco. (AP/Marcio Jose Sanchez)
People call an unemployment insurance hotline at the Career Link Center in San Francisco. (AP/Marcio Jose Sanchez)

See also: Infographic: Gender and the Recession

The pace of job losses has leveled off but the unemployment rate continued to rise rapidly in April. While employers have stopped shedding workers at an accelerating rate, the sheer number of unemployed workers continues to accelerate and the overall jobs picture remains grim. Long-term unemployment is at an all-time high and nominal wage growth has come to a halt. For those unlucky enough to have lost their job, a new one appears to be increasingly difficult to find.

Employers shed 539,000 jobs in April, and while this is down from the past few months, it remains the ninth-largest one-month fall in employment since the end of World War II, indicating that the troubles in the labor market are far from over. The economy has shed 5.7 million jobs since the recession began in December 2007; nearly half of those (2.7 million) occurred in the past four months.

The unemployment rate is now 8.9 percent, a 26-year high and an increase of 0.4 percentage points in April alone. Six million additional people became unemployed over the past year—more than any other year since the U.S. Bureau of Labor Statistics began tabulating this data just after World War II—and there are now a total of 13.7 million people unemployed—more than at any other time on record.

jobs lost by recession

Some commentators are focusing on the “green shoots”—what they say are the nascent signs of recovery—yet the grim labor market picture points to an economy mired in recession. The American Recovery and Reinvestment Act is beginning to pump money into the economy—$28.6 billion has already been spent—but the return of low unemployment will take more time.

For those who have lost their job, finding a new one is proving to be more difficult than in any prior recession on record. Nearly two-thirds of the unemployed—64.4 percent—are out of work because they lost a job, a number higher than at any point since 1967, when the BLS began tracking that data.

Competition for work is stiff. In February 2009 (the latest data available), there were 12.5 million unemployed workers but only 3.0 million available job openings. Millions are simply giving up on finding work altogether: 5.9 million workers now report being out of the labor force but wanting to have a job. Out of this number, 740,000 reportedly left the labor force because they were so discouraged with the job search—nearly double the number a year ago.

The extent of the difficulties finding new work are indicated by one particular startling number. The share of the unemployed who have been out of work and searching for a job for at least six months is now at nearly a third—27.0 percent—and an all-time high, despite the fact that employers have been shedding jobs at a record rate over the past few months. With so many new workers laid off, the increase in the share of long-term unemployed is striking.

Extending unemployment benefits beyond six months continues to be critical. In 2008, 3.4 million workers exhausted their regular, six month unemployment benefits without finding a new job. The ARRA provides full funding for an additional 13 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. However, more than 300,000 workers will likely be left without these benefits unless certain states with especially high levels of unemployment act quickly to adopt a temporary change in state law that will allow the state to immediately qualify. Still, only half of unemployed workers have received any unemployment compensation over the past year, meaning even this change will be insufficient for helping many families.

The jobs that have been lost in construction and manufacturing may be especially slow to return, which means that families will likely continue to struggle with high unemployment and lower earnings. Manufacturing has shed 1.6 million jobs since the recession began in December 2007, accounting for nearly a third (28.3 percent) of the total job losses so far, with 149,000 jobs lost last month. The construction industry has lost 1.2 million jobs since the recession began and 110,000 jobs were lost last month.

The temporary help industry—a harbinger of whether firms will likely hire in the months to come—has lost 825,000 jobs since the recession began, nearly a third of this industry’s jobs. The federal government has hired many people, but these are mostly temporary workers to conduct the 2010 census.

In another sign of tough times for families, hours remain low. The average work week remained at 33.2 hours per week in April—the lowest level since 1964 when the Bureau of Labor Statistics began tabulating this data. Nearly 8.9 million workers reported working less than full time due to slack business conditions or because they could only find part-time work. Such workers are at the greatest risk of losing health benefits as they may no longer qualify for their employer’s plan, but may also not qualify for Medicaid.

Families continue to struggle with the impact of the job losses and lower wages of this Great Recession, stemming largely from the failed policies of the Bush administration. The share of the U.S. population with a job remained at 59.9 percent in April—lower than any time since 1985. The fall off in the employment rate has been larger among men than women, and there are fewer men at work than at any point since the BLS began tabulating this data after World War II (see infographic).

Workers of color have also been extremely hard hit by unemployment, especially men. The unemployment rate for adult African-American workers is 14.0 percent, higher than at any time since 1984. Adult male African Americans have seen their unemployment rate double over the past year, from 8.6 to 17.2 percent. Adult Hispanic workers’ unemployment was 10.1 percent last month and Hispanic men’s unemployment has nearly doubled over the past year, from 5.8 to 10.2 percent. And the unemployment rate for adult white workers was 7.5 percent in April, higher than at any time since 1983. White men’s unemployment doubled from 4.2 to 8.5 percent over the past year.

Nominal wages were virtually unchanged last month and grew at an annualized rate of 2.2 percent over the last quarter. The Consumer Price Index for Urban Wage Earners and Clerical Workers fell by 1.0 percent from March 2008 to March 2009. The slowdown in nominal wage growth is not only hard for workers, but will limit the recovery in the months to come. So long as families continue to see lower incomes, economic growth will be contained, since consumers make up 70 percent of the economy.

The full impact of the Great Recession is only beginning to be felt in households across the country. The wage situation is likely to get worse for many families in the months to come, which will continue to drag down economic growth. If history is any guide, even when the unemployed find work many workers will find that their earnings will be lower than in their previous job. And this is already the case. The BLS found that in mid-2008, only a third (36.3 percent) of workers displaced from a full-time job because their firm closed or relocated found a new, full-time job at a salary that was equal to or greater than their previous salary.

Recovery may be coming, but for most Americans, it’s going to take a long time to see their jobs come back. Hopefully, our attention will focus on not just stemming the tide of job losses, but robust job creation.

Heather Boushey is a Senior Economist at the Center for American Progress. For more on this topic, please visit our Economy page.

See also: Infographic: Gender and the Recession

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Heather Boushey

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