Job Losses Mount

The job numbers released today by the Department of Labor provide further evidence that that the economy is not working for most Americans, with new indications that the labor market is likely to remain weak for some time. In July, the economy lost another 51,000 jobs, and unemployment increased to 5.7 percent from 5.5 percent, its highest level since March of 2004. Job losses were widespread, declining in construction, manufacturing and several service industries.

While U.S. gross domestic product figures released yesterday showing modest growth of 1.9 percent for the most recent quarter may be enough to keep some economists from labeling the current period as a recession, today’s employment numbers demonstrate convincingly that the economy is very weak. Over the past 12 months, the ranks of the unemployed have swelled by 1.6 million people, and the unemployment rate has risen by 1 percentage point, a significant increase.

The economy has lost jobs for seven straight months—the longest stretch since the period ending May 2002—shedding 460,000 jobs since January. This is the longest stretch of job loss since the period ending May 2002 – the tail of the last recession. And July’s job losses come on the heels of a very weak labor market during the most recent expansion. From March 2001, when the current business cycle started, through the end of 2007, before the job losses began, job growth averaged 0.6 percent per month—less than one-third of the job growth of the previous business cycles.

Not only are people losing jobs, but those with jobs are increasingly likely to have their hours reduced to part-time. The number of people who are working part time involuntarily—predominantly those who have lost hours or cannot find full-time work—jumped to 5.7 million last month, an increase of almost 1.4 million over the last 12 months. And many people who have lost jobs are having significant difficulty finding new ones. The number of people who have been unemployed for 27 weeks or longer increased to 1.7 million people, up from 1.6 million the previous month and 1.3 million the previous July.

Construction employment was down by 22,000 in July, and the sector has lost 557,000 jobs since September 2006. Retail jobs dropped by 16,000 for the month, the eight straight month of losses in the sector. Manufacturing employment fell by 35,000 jobs for the month, and the sector has lost 380,000 jobs over the past 12 months.

As has been the case for some time, health care was one of the very few sectors to create jobs, generating 33,000 jobs for the month. Mining—driven largely by oil and gas—also created jobs for the month, increasing employment by 10,000. The good news in these sectors was far too little to offset widespread job losses throughout the rest of the economy.

Hourly wage gains are also slipping. Average hourly earnings increased only by 6 cents in May, and are up just 3.4 percent from a year earlier—less than the rate of inflation.

What’s worse, Signs indicate that the labor market is likely to remain weak. Temporary employment continues to fall, which is alarming as it is generally considered a predictor of larger changes in the labor market because many companies use temporary help services as a means to quickly adjust their operations to meet fluctuating demands for their products and services. In July, temporary help services lost 29,000 jobs, the ninth straight month of job loss and the longest such stretch since the period that ended December 2001.

Temporary employment has now fallen for 18 of the past 19 months, the worst performance of the sector since data for the sector began being collected in 1990.

Another worrying sign: Restaurant employment, which for several years has been one the few sectors increasing employment, created only 3,000 jobs in July. This suggests that recent increases in food prices are finally starting to have an impact on the sector, and that future employment growth may not be likely.

One of the few bright spots—if you can call it that—was that job losses in May and June were found to be slightly less than previously estimated.

Policymakers concerned about the lack of job opportunities can find a clear direction for action in today’s report. As more people are losing their jobs, and as long-term unemployment increases anew, policymakers should focus on legislative action to help boost the long-term competitiveness of the U.S. economy and our working men and women with a program including an expanded infrastructure investment program and new green jobs initiative to retool our infrastructure to combat global warming.

And when Congress returns from their August recess, one of the first things they should address are reforms to unemployment insurance. They should temporarily extend the length of time the unemployed can collect benefits, and significantly expand the reach of unemployment insurance. The reason: currently only about 35 percent of those who are unemployed receive unemployment benefits due to structural rigidities in the system that do not take into account new work patterns in the economy

David Madland is Director of the American Worker Project at the Center for American Progress Action Fund. For more on the Center’s labor policy analysis and recommendations please see The American Worker Project.