No Good News for Workers

Employers Continue to Shed Jobs at a Record Pace

The labor market continues its downward acceleration. This is now the worst recession in post-World War II history in terms of total jobs losses, the total number of unemployed workers, and the rapid pace of the contraction. It is also, as of April, the 16th month of recession, as long as any other recession in the post-World War II era. Most of the job losses have occurred in the past few months as the pace of the downward spiral continues to quicken.

net monthly job creation

Employers shed 663,000 jobs in March—the third largest one-month fall in employment since 1949. The second largest was in December 2008, and the largest was in January 2009. Total job losses are now at 5.1 million since the recession began in December 2007, and nearly two-thirds of the total (3.3 million) have occurred in just the last five months.

The unemployment rate spiked 0.4 percentage points up to 8.5 percent in March, and is now higher than at any time since 1983. There are 13.2 million people unemployed—more than at any other time in history. And 5.3 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.

It seems likely given the nature of the downturn and the scope of the job losses so far that job losses will continue, even as the American Recovery and Reinvestment Act begins to pump money into the economy. States and localities around the nation are working to spend the recovery funds and target them toward efforts that will stimulate the economy the most. Some of the first signs of progress from the recovery package are likely to be that state and local governments keep people on their payrolls as they are able to tap into federal funds to avoid layoffs. But given that it will take some time for the money to get out there, it will likely be months before we see much progress.

Job losses are widespread, and only health care and education showed any job gains last month. Just three industries—manufacturing, construction, and temporary help services—have accounted for nearly two-thirds of the job loss during the recession so far.

Manufacturing has shed 1.5 million jobs since the recession began in December 2007; over half of that has come in just the past four months, and 161,000 jobs were lost last month. The construction industry has lost 1.1 million jobs; more than half of that total has occurred in the past five months, and 126,000 jobs were lost last month. The temporary help industry—a harbinger of whether firms will likely hire in the months to come—has lost over three-quarters of a million jobs since the recession began, with over half of that coming in the past five months, and 72,000 jobs lost last month.

Employers are not only laying off workers—they are cutting hours as well. The average work week fell by 0.1 hours to 33.2 hours per week in March—the lowest level since 1964 when the Bureau of Labor Statistics began tabulating this data. Nearly 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.

Grim as it is, the unemployment rate does not tell the whole story. The Bureau of Labor Statistics also reports an alternative measure of unemployment that includes all the unemployed plus all marginally attached workers and those employed part time for economic reasons as a percent of the civilian labor force. This rate has grown to 15.6 percent, up 6.5 percentage points from a year ago.

There is no indication that it is becoming easier to find a new job once a worker becomes unemployed. There are nearly four workers unemployed for every job available: In January 2009 (the latest data available), there were 11.6 million unemployed workers but only 3.0 million available job openings.

The length of time that workers remain unemployed continues to rise as well. The typical unemployed worker in March had been out of work and searching for a new job since the last week of October 2008 (20.1 weeks), and nearly a quarter (24.2 percent) of the unemployed had been out of a job for at least six months—the highest level since mid-1983. This, along with the fact that seven states have unemployment rates higher than 10 percent, makes it urgent for states to take advantage of the additional funds in the recovery package for extending unemployment benefits to the long-term unemployed. Yet a number of states have yet to act and are delaying getting needed income to unemployed workers and their families.

Millions are simply giving up on finding a new job. There are 5.8 million workers who report being out of the labor force but wanting to have a job. Out of this number, 685,000 left because they were so discouraged with their job search—double the number a year ago.

The share of the U.S. population with a job is now at 59.9 percent, which is lower than any time since 1985. This is especially striking since so many women have entered the labor market since then. 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: 68.2 percent of U.S. men age 20 and over had a job in March, down 4.1 percentage points from a year ago. Among women, 56.8 percent had a job in March, down from 1.4 percentage points from a year ago. The unemployment rate for men aged 20 and over was 8.8 percent in March, while it was 7.0 percent for women—a difference of 1.8 percentage points, which is larger than at other time since 1949.

Workers of color have also been extremely hard hit by unemployment. The unemployment rate for African-American workers is 13.3 percent, up from 9.0 percent a year ago. Hispanic workers’ unemployment was 11.4 percent last month, up from 7.0 percent a year ago. And the unemployment rate for white workers was 7.9 percent in March, up from 4.5 percent a year ago.

Nominal wages grew at an annualized rate of 2.8 percent last quarter. The Consumer Price Index for Urban Wage Earners and Clerical Workers fell by 0.5 percent from February 2008 to February 2009, so workers are taking home more in inflation-adjusted terms compared to a year ago. But with hours dropping and jobs being loss, this isn’t much of a silver lining, and it is unlikely to persist.

The administration is taking steps to cope with the economic crisis that it inherited. There are two critical components: Credit markets must begin to function again and there must be an infusion of demand to get businesses spending—and hiring—again. The plans put forth by the administration to deal with the financial sector will hopefully shore up credit markets in the months to come, but it will take some time for that to work its way through to increased employment. Similarly, the recovery package will boost demand, but it will likely take months before we are able to evaluate its progress. In the interim, states should take steps to aid unemployed workers to reduce family hardships and help them maintain their spending.

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