The Great Jobs Recession Goes On
Mortimer B. Zuckerman
The recession is officially over but unemployment remains high
There is no life in our jobs market. The recession officially ended in June 2009, but the Great Jobs Recession continues apace. Not since the government began to measure the business cycle has a deep recession been marked by such high levels of unemployment and underemployment, and followed by such anemic job growth. More jobs were lost in the recession of 2007-09 than in the previous four recessions combined -- and this time it is an agonizingly slow business to replace them. Of the 8.8 million jobs lost during the downturn, roughly 900,000 were recovered in 2010, and many of these were temporary census positions. Since last June, employers have added a net of only about 284,000 jobs.
The recent headline news that the unemployment rate has fallen by 0.4 percentage point to 9 percent reflects somewhat more activity in manufacturing and retail, but less work in construction, transportation, and warehousing. The 9 percent was thus not bad news, but it was not good news either, since we need 130,000 new jobs each month just to meet the needs of new entries to the labor force and we gained only a dismal 36,000 in January. That comes on top of last year's disappointing monthly job creation rate of only 75,000 on average. Altogether, the 9 percent headline figure is an illusory portrait of the situation across the country, representing 13,863,000 men and women out of work. What happens if you add to that the 8.4 million "involuntary" part-time employed, whose hours have been cut back? Then you get a household unemployment rate slightly under 17 percent.
Turn the percentages into people again. In January, according to the Bureau of Labor Statistics, we had 2.8 million people only "marginally attached" to the labor force. A million or so of these are counted as the "discouraged," people who have given up altogether. The other 1.8 million have looked for work in the last 12 months without success but are not counted in the labor force because they haven't tried to get a job in the last four weeks for any number of personal reasons, such as family sickness, school responsibilities, weather, and travel problems. While the headline unemployment figure is down, the number of "marginally attached" increased by 300,000, and the decline in the rate from 9.4 to 9 percent is primarily because these workers have just dropped out of the market. But they haven't dropped out of life in America. They represent a colossal waste of energy and talent, as well as a loss of spending power.
It all adds up to a shocking figure: More than 25 million Americans are now either jobless or underemployed. That's nearly twice as many Americans out of work as there were in the black year of 1933 -- 13 million then. (Only in one year before 1940 and the war did unemployment dip below 8 million.) Of course, the labor force was much smaller then, so the unemployment rate was higher. In the Great Depression, between one third and one quarter of the working population didn't have jobs.
Our real unemployment rate in 2011 is almost twice what it was before the onset of the recession in 2007, and at the current pace, it looks as if it will take until late 2016 to make up for the net job loss to date of 7.5 million. What is normal at this stage of the typical recession cycle is not only that job losses would be reversed, but that a new record high would be reached. As the economist David Rosenberg points out, after the dot-com bubble burst and with far less government stimulus in the last so-called jobless recovery, we had already recouped 62 percent of the aggregate decline in unemployment. This time around we have managed to recoup a mere 12 percent, despite the most stimulative fiscal and monetary policy in the history of America.
The detailed statistics are even more depressing. Here are some highlights:
-- The number of full-time jobs, the critical factor in rebuilding personal confidence and spending, is down by roughly 10 million. Those suffering from long-term unemployment, who have collected benefits for 27 weeks or more, now amount to more than 4 percent of the labor force compared to the previous post-Depression peak of 2.6 percent in 1983. This is the highest since these records were started in the late 1940s.
-- The mean duration of unemployment increased from 30.5 weeks in January 2010 to 36.9 weeks in the most recent tally.
-- One third or more of the new jobs over the last year have been in temporary help services, formerly a good leading indicator of future labor demands but today a sign of dismal times. These jobs reflect businesses trying to cut the benefit costs of full-time employment and using just-in-time hiring and part-time hiring to improve the bottom line.
-- Long-term unemployment is approximately 44 percent of the total, the highest of any in the past 10 recessions, when it never exceeded 30 percent.
-- The jobs hard-to-get index, as of the end of last year, was 46.8 percent, while the jobs-plentiful index, another measure of consumer confidence, dropped to 3.9 percent.
-- The recession has primarily affected young and adult males, the traditional family breadwinners, and especially blacks. As of December, the proportion of men age 45 to 54 in the labor force -- working or looking for work -- was down to 86.2 percent, while for men ages 35 to 44, it was 90.9 percent. For men 25 to 34, the proportion in November was 89 percent. These are the lowest since the government began issuing these statistics in 1948.
-- The average workweek for all employees in private, nonfarm payrolls is at a low of 34.2 hours and dropped last month. Employers normally increase the hours for their existing workforce before hiring, for history shows that hours lead bodies as a forward-looking barometer to hiring, so this is a signal that bodes badly for future employment.
-- Real hourly compensation dropped in the first four quarters after this recession officially ended, compared to a more typical gain averaging 2.5 percent during the first four quarters of expansion after the previous 10 recessions.
-- State and local governments, which comprise 15 percent of the total jobs pie, are in a major downsizing mode, which will be a drag on employment throughout this entire year.
-- Work stoppages involving 1,000 or more employees have fallen to the lowest levels since records began in 1947; there were only five strikes or lockouts in 2009, and 11 last year. It is good news in its way, but it reflects increased job insecurity.
Other characteristics of the job market are gloomy, too. Many of the job gains are in lower-paying leisure, hospitality, education, and health service industries.
Longer-term trends have accelerated in ways depressing for the American worker. There is more outsourcing abroad, more automating, more conversion of full-time jobs to temps and contracts, and a stagnant median wage. Information technologies are advancing dramatically, doubling every couple of years, and increasingly are being employed to eliminate jobs of all types.
This underscores the downside of advancing technologies, which together with globalization have been the primary forces depressing wages and diminishing opportunities, especially for those jobs that are fundamentally routine and repetitive in nature. The risk that semi-intelligent machines may destroy so many jobs that this trend could literally destabilize the whole society is one of the greatest challenges facing governments in all countries as they seek to find work for the millions of graduates coming into a labor market that has nothing for them.
The risk we may face in the United States is that the high unemployment rates may become chronic if, for the next several years, we average real GDP growth of only 2 percent, as many predict. The rate necessary to keep the unemployment rate stable is 3.3 percent. The lower growth rate would increase the average unemployment rate by about 10 percent of the previous rate, year over year. Nothing yet has appeared on even a distant horizon to alleviate Federal Reserve Chairman Ben Bernanke's citing of the job market as a chief source of national concern.
Generating new jobs for a growing population is a challenge to the left, right, and center of all our political parties and their entrenched positions on economic issues. They need to think beyond the arguments about this year's budget or the next. Millions of men and women are willing and eager to work, but their skills, brainpower, and energies are wasted. It doesn't make sense.
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