Center for American Progress

STATEMENT: From Bad to Worse – Unemployment Rate Hits Working Americans Across the Spectrum
Press Statement

STATEMENT: From Bad to Worse – Unemployment Rate Hits Working Americans Across the Spectrum

By Christian E. Weller

The unemployment rate now stands at its highest level since September 2003, according to the Bureau of Labor Statistics. This stunning increase in the unemployment rate—0.4 percentage points in one month—is the second-largest jump since April 1995 with the largest registered in May 2008. Overall, the unemployment rate has risen by 1.4 percentage points, from 4.7 percent, over the past 12 months. This is the largest increase in the unemployment rate over the course of one year since the 12-month period that ended in May 2002.

This deterioration in labor market conditions is hitting Americans across the spectrum. Over the past year, the unemployment rate for men rose by 1.6 percentage points to 6.3 percent; by 1.2 percentage points to 5.8 percent for women; by 1.2 percentage points to 5.4 percent for whites; by 2.9 percentage points to 10.6 percent for African Americans; and by 2.5 percentage points to 8.0 percent for Hispanics. The youth unemployment rate rose by 2.7 percentage points to 18.9 percent, and the unemployment rate for people between the ages of 35 and 44 increased by 1.4 percentage points to 4.9 percent.

All groups struggle in this labor market, but the current decline affects minorities in particular. For all groups except Hispanics and African Americans, the rise in the unemployment rate is the sharpest since early 2002, when the fallout of the last recession came to an end. For Hispanics, though, the increase in the unemployment over the past 12 months is the highest since the 12-month period that ended in September 1991. And for African Americans, the increase in the unemployment rate over the past year was the fastest since the 12-month period that ended in January 1983.

The other noteworthy problem area is youth unemployment. In August 2008, the unemployment rate for people between the ages of 16 and 19 was 18.9 percent, down from 20.3 percent in July, but up from 16.2 percent in August 2007. Although this rate tends to fluctuate a fair amount on a monthly basis, it is important to note that it has been above 18 percent for the past four months. The last time this was the case was in early 1994.

The rise in unemployment is a reflection of continued job loss in the United States. August marked the eighth month in a row of job losses. The total job loss for 2008 came to 605,000 jobs during the first eight months of this year. On average, the U.S. economy lost 23,600 jobs per month during the past 12 months, compared to an average monthly job gain of 116,100 jobs per month in the preceding 12 months, and 184,000 jobs during the 12 months before that. For the entire business cycle, which started in March 2001, the total employment growth rate amounted to 0.5 percent, less than one-fourth that of previous business cycles since World War II.

Another way to look at the data is that almost all sectors of the economy lost jobs. Manufacturing continues to be the biggest loser. This sector has lost a total of 772,000 jobs during 26 months of continuous job losses. In August 2008 alone, manufacturing employment dropped by 61,000—the largest monthly drop since July 2003.

The weaknesses of the housing sector and its spillover into the financial sector and onto consumers also show up in the employment data. Construction dropped by 8,000 for the 14th monthly job loss in a row, retail employment decreased for the ninth month in a row with a drop of 19,900 in August, and the financial sector has lost jobs or shown no change for 13 months in a row with a decline of another 3,000 jobs in August 2008.

Other sectors have also experienced employment decreases. Professional and business services, especially temp agencies, saw a total drop of 53,000 jobs in August. Also, leisure and hospitality saw a decline of 4,000, which was due to a decline of job losses in hotels by 8,300 jobs. This was only offset by a small increase of 2,300 jobs in restaurants—a sector that has enjoyed a remarkable run in employment growth in recent years.

Two sectors are noteworthy as the standouts here since they added jobs in August. Education and health care added a total of 55,000 jobs, largely as a result of an increase of 26,900 new jobs in health care. And, government jobs rose by 17,000, primarily as a consequence of more hiring by local governments, outside of education.

Economists are still debating if the country is in a recession, but today’s figures leave no doubt that the labor market situation will feel like a recession to most families who work for a living. Although much of the economic policy debate during the presidential election cycle focuses on the important issue of promoting stronger, long-term growth, policy makers will have to start paying attention to the more immediate concern of a contracting labor market against the backdrop of massive debt burdens and still higher prices for important goods and services.

Christian E. Weller is an Associate Professor in the Department of Public Policy and Public Affairs at the University of Massachusetts-Boston and a Senior Fellow at the Center for American Progress.