Getting Old

The U.S. Labor Department reported a net loss of 263,000 jobs during September—worse than the 180,000 loss expected, led by a substantial drop in local government employment. In addition, previously reported losses in July and August were revised to show the addition (or is it subtraction?) of 13,000 more job losses.

September’s decline was the 21st straight, consecutive, uninterrupted, in-a-row, successive month of U.S. job losses. One has to go back to December 2007 for the last time the American economy added jobs.

By coincidence, December 2007 is the “official” date when the Great Recession began…the longest, deepest, most pervasive, most costly, and most painful downturn since the Great Depression. We are now 22 months into the recession. By comparison, the two prior recessions in 1990-91 and 2001 each lasted eight months.

The nation’s unemployment rate also moved higher, as expected, to 9.8% in September from 9.7% in August. The current 9.8% rate compares to the 6.2% jobless rate of one year ago and is more than twice the 4.7% rate of September 2007.

Since It Began

The U.S. goods producing sector lost another 116,000 jobs in September. The construction sector lost another 64,000 jobs during the month. The overall construction sector has now seen total employment plunge by 19.7% since the recession began (Source: The Wall Street Journal). The manufacturing sector lost an additional 51,000 jobs with total manufacturing employment down 14.9% since December 2007.

The U.S. service providing sector lost 147,000 jobs in September, with retail trade losing another 39,000 jobs. Total retail trade employment is down 5.6% since the recession began. The leisure & hospitality sector lost another 9,000 jobs, with total employment declining by 2.9% since December 2007.

Professional & business services employment had a less painful decline of 8,000 jobs, although recession losses have seen an 8.3% decline. Financial activities employment fell by 10,000 jobs during the month, with a 6.6% net decline over the past 22 months.

The education services sector lost 16,900 jobs during September, but has seen total employment rise 2.7% since the Great Recession began. Health care & social assistance employment rose by 20,500 jobs during the month and has climbed 4.2% since December 2007.

The government sector lost an estimated 53,000 jobs in September, with most of these in local (non-education) government. Sharp declines in tax revenues across the nation contributed to the sharp decline. Funding from the Administration’s $787 billion stimulus program had arguably softened the blow in state and local government job cutbacks in recent months. Government employment has risen 0.2% since the recession began.

Adding Insult to Injury

Even more ominous was the U.S. Labor Department’s preliminary estimate of the annual benchmark revision to be formally issued in February 2010. The estimate suggests that an additional 824,000 jobs were lost in the 12-month period ending in March 2009.

More than 70% of the downward revision impacts service providing employment. Goods producing primary sectors of construction and manufacturing could see another combined 219,000 jobs estimated to have been lost.

Current data already shows that the economy lost more than 4.8 million jobs during that 12-month period. The loss of another 824,000 jobs would bring the total to more than 5.6 million American jobs lost in the 12 months ended last March, likely the darkest 12-month period for employment since the Great Depression.

In addition, job losses since the Great Recession began, already at more than 7.2 million, would exceed 8.0 million jobs. Here’s hoping that once we finally get through the challenges of the past nearly two years, we never face such a downturn again.

Still Rising

As noted, the nation’s unemployment rate rose again to 9.8%, a 26-year high. We continue to suggest that the jobless rate will likely reach, and probably exceed, 10.0% in coming months. Note: given the national media’s obsession with bad news (it sells newspapers and draws viewers), one can only imagine the “ink” that will be used to discuss a 10.0% unemployment rate when, and if, it arrives.

The unemployment rate for adult men rose to 10.3% in September, versus 10.1% in August. This recession has hit traditionally male-dominated sectors of construction and manufacturing particularly hard.

The unemployment rate for adult women rose to 7.8% during the month, up from 7.6% in August. The jobless rate for teenagers seeking jobs rose to a painful 25.9%, up from the prior month’s 25.5% rate.

More Insult…

An estimated 15.1 million Americans were out of work in September, with roughly half the total losing jobs since the recession began. More than one-third of these people have been unemployed for more than six months.

…and More Injury

The “underemployment” rate, the total of those officially counted as unemployed, combined with those working part-time who would prefer to work full-time, and those discouraged workers who have left the labor force, reached 17.0% in September, versus 16.8% in August. The 17.0% rate is the highest since this measure began in 1994.

The average hourly wage rose only 0.1% (one cent) to $18.67 hourly for rank-and-file workers, which represent 80% of the labor force (The New York Times). The 2.5% rise during the past 12 months was the smallest year-over-year rise in four years. Even so, it looks better versus the actual 1.5% decline in the consumer price index for the most recent 12-month period.

Chickens and Eggs

We have noted previously that the unemployment rate typically continues to rise and monthly job losses continue even after an economic recovery has begun. This latest trip around the economic cycle is unlikely to be any different.

A “chicken versus the egg” time is approaching. Thousands of shell-shocked American businesses want to see sales and business activity improve before they add additional workers.

At the same time, improving sales and more robust business activity are constrained by ongoing jobs losses and the lack of hiring by employers. Consumer income gains and consumer spending remain weak.

Unfortunately, the prospect of bigger government, more government spending, enormous deficits, more regulation, and higher taxes doesn’t exactly inspire either companies or consumers to get off the dime…

Featured in the 7 October 2009 issue of Jeff Thredgold’s Tea Leaf newsletter.

As you have no doubt heard ad nauseam, much of the July employment news was better than had been expected. Job losses were less than the consensus forecast, while the unemployment rate actually declined slightly.

Job Losses … in Perspective

The American economy lost another 247,000 jobs during July. While a terrible number, it was less than the 325,000 net loss expected. In addition, previously reported job losses for May and June were revised to show 43,000 fewer jobs lost.

Average job losses during the past three months (331,000) were roughly half the average loss of 648,000 jobs monthly during the prior four months. Still, the loss of nearly 3.6 million jobs during 2009-to-date outpaces the nearly 3.1 million jobs lost during 2008, which was the worst year for U.S. job performance since 1945.

The combined loss of nearly 6.7 million jobs (down 4.8%) during the Great Recession…so far…is easily the most painful period of lost employment since just after WWII. Unfortunately, this number will only grow over the balance of the year.

Job Losses … in July

The nation’s goods producing sector lost another 128,000 jobs during July, led by the elimination of another 76,000 jobs in construction. The nation’s manufacturing sector saw another 52,000 jobs bite the dust, although the loss was the smallest in a year.

One element of what economists call “noise” in the report was the “addition” of 28,000 jobs in the automotive sector. While GM and Chrysler did see many workers return to the factories, the infamous “seasonal adjustment” seems to have overstated the gain a bit.

The nation’s much larger service providing sector reported a loss of another 119,000 jobs, led by the elimination of 44,000 positions in retail trade. The professional & business services sector also got hammered, although less than in recent months, with a loss of 38,000 more jobs. Better news saw employment gains in education & health services (17,000 net new jobs), leisure & hospitality (9,000 net new jobs), and government (7,000 net new jobs).

Jobless Rate Dips

The “headline grabbing” number in the report was the surprising decline in the nation’s unemployment rate to 9.4% in July from 9.5% in June, the first decline in 15 months. Unfortunately, “noise” was front and center with what is likely to be a temporary reduction in the rate.

It seems counter-intuitive to lose roughly one quarter of a million jobs during a month, only to have the unemployment rate decline. Such was the case in July. The jobless rate declined because an estimated 422,000 people left the labor force during the month, thus no longer to be counted as unemployed.

In fact, while more and more signs of a return to modest U.S. economic growth are apparent, the unemployment rate is likely to reach—and probably exceed—10.0% during the next 6-9 months. The logic follows…

When people who had previously given up a search for employment read or hear of more opportunities for jobs in an improving economy, hundreds of thousands begin to search again. Unless and until they find jobs, they are once again counted as unemployed … hence, a rising jobless rate.

More Job Data…

The Good
• The average hourly work week rose ever so slightly to 33.1 hours from a record low of 33.0 hours in June, a sign that many employers are no longer cutting hours as much for their workers. More signs of economic growth in coming months will lead this measure higher, before laid off workers are rehired

• Along the same lines, the number of workers who preferred full-time work but could only find part-time employment fell by 191,000 (down 2%), another positive sign

• The number of job seekers who have been without work for 14 weeks or less was 6.8 million in July, the smallest total in eight months

• The average hourly wage rose by three cents, up 0.2%, to $18.56 hourly. The 2.5% rise of the past 12 months is weak, but still looks good versus the 1.4% decline in the Consumer Price Index during the most recent 12-month period

• The “underemployment” rate, one which combines the jobless rate, those working part-time who prefer to work full-time, and those discouraged people who have left the labor force, declined as well, dipping to 16.3% versus a record high (since such a measure started 15 years ago) of 16.5% in June

The Bad
• The number of people unemployed for more than six months rose again to nearly five million, a record high

• The average job seeker has been without work for an average of nearly six months, the longest period in 61 years of U.S. Labor Department recordkeeping. The year-end 2008 average was five months

From Here?

As usual, employment forecasts are all over the map. Many forecasters suggest that the level of corporate confidence is still so weak as to severely limit new hiring in coming quarters. Others suggest that the plunge in U.S. employment last fall and earlier this year was so rapid, so severe, so all-encompassing, that an accumulation of more positive economic news will lead total employment to snap back with a vengeance.

In either case, painfully high levels of unemployment are likely to remain with us for an extended time. Even the most bullish forecasters suggest that the U.S. economy will not return to near full employment, considered to be a 5.0%-6.0% jobless rate, until 2012 or slightly later.

One more month…one more exceedingly painful U.S. employment report

We have now had seven consecutive terrible job reports since the American consumer was told “the sky was falling” last September 18 by Federal Reserve Chair Ben Bernanke and then-U.S. Treasury Secretary Paulson. It was on that day that this dynamic duo emotionally and very publicly asked the U.S. Congress for $700,000,000,000 to fix financial markets.

That request, and the up-and-down discussion within the U.S. Congress during the following week, simply scared the American consumer to death. The consumer stopped spending…companies of all sizes adopted a “shoot first, ask questions later” approach to layoffs…and the economy dropped quickly. The rest, as they say, is history.

U.S. Employment Growth

The Numbers
Total U.S. employment fell by another 663,000 net jobs during March, matching economists’ consensus view. February’s previously reported loss of 651,000 jobs was not revised. That’s the good news. However, January’s previously reported (and previously revised) loss of 655,000 jobs lost was revised to show a loss of 741,000 jobs during the month—the worst month for job losses in 59 years. April losses will be ugly as well.

Equally painful was the surge in the nation’s unemployment rate from 8.1% in February to 8.5% in March, the highest level in 25 years. By comparison, the jobless rate was 5.1% just one year ago. The jobless rate averaged 4.6% in both 2006 and 2007 and 5.8% during 2008. An American jobless rate at or slightly above 9.5% is a real possibility within the next 9-12 months.

Economists have pointed out a handful of more positive economic statistics in housing, manufacturing, and retail sales in recent weeks to suggest that the U.S. economy is seemingly in the process of bottoming out. The consensus view of forecasting economists, as well as the collective view of the stock market, is for a return to marginally positive (yes positive!) U.S. economic growth during 2009’s second half.

We continue to expect GDP to be slightly positive during the fourth quarter. There was nothing in the March employment data to support this view, although yes, employment data is a lagging economic indicator.

Job Demise
The American economy has now lost 5.1 million jobs since the U.S. recession officially began in December 2007. Nearly two-thirds of the job erasures have occurred during the past five months alone.

As noted previously, the net loss of 3.1 million jobs during 2008 was the worst year for employment since 1945. To illustrate just how bad the first three months of 2009 have been…if no additional job losses were recorded over the balance of the year, 2009 would still be the fourth worst year since the U.S. Labor Department began tracking such data in 1939 (CNNMoney.com).

Inside the Pain
To illustrate just how pervasive and all-encompassing the current lengthy recession is, almost no employment sector is avoiding job cuts. The nation’s goods producing sector lost another 305,000 jobs during March. U.S. manufacturing was hit with the loss of another 161,000 jobs during the month, the 16th consecutive monthly decline. The nation’s embattled construction sector lost another 126,000 jobs, the 21st month in a row of cuts.

Equally dismal was the 358,000 net decline in service sector employment. The professional & business services sector lost another 133,000 jobs, while retail trade saw another 48,000 jobs bite the dust. Leisure & hospitality lost another 40,000 jobs, the finance industry lost another 25,000 jobs, and government employment declined by 5,000 positions. Only the education & health services category saw rising employment, although the net increase of 8,000 jobs was the weakest in that sector in many moons.

Better news was found in regard to the average hourly wage, which rose 0.2% (three cents) to $18.50 hourly. While the 3.4% rise over the past 12 months is hardly worth writing home about, it looks good versus consumer inflation which has been essentially zero during the past year.

More Jobless
Almost everyone knows one or many people who have seen their jobs disappear during the past 12-24 months. Prospects to replace these jobs with similar income levels are, for most, difficult. Such is the nature of a recession, especially the long and deep variety from which we are currently suffering.

A record 13.2 million people are now officially unemployed. Even more painful is the “underemployment” rate. This rate, which attracts rising attention each month, includes those who are unemployed, those who are working part-time but would prefer to work full-time, and those discouraged people who have dropped out of the labor force but would accept a job if one were offered…

…the “underemployment” rate is now 15.6%, up from 14.8% in February, and the highest since this particular measure began being tracked 15 years ago. This rate will move higher in coming months as well.

College Grads
Current job prospects for new college graduates are dicey. The National Association of Colleges and Employers forecast that employers will hire 22% fewer graduates this spring (The Associated Press).

More newly minted graduates are required to pound the pavement for jobs, rather than simply waiting for recruiters to visit their campuses. That may actually be a good thing. Since the average graduate will change jobs three times within five years of graduation, developing good job search skills now may just come in handy.

Pick Your Poison
No gender, race, or education level avoided the employment ax in March. The jobless rate for adult men spiked from 8.1% in February to 8.8% in March as traditionally male-dominant (can I say that?) sectors such as manufacturing and construction got hammered. The jobless rate for women rose from 6.7% to 7.0%.

The jobless rate for Whites rose from 7.3% in February to 7.9% in March. The jobless rate for those workers of Hispanic or Latino ethnicity rose from 10.9% to 11.4%. The jobless rate for Blacks or African-Americans actually dipped by 0.1%, but was still an unacceptably high 13.3%.

Unemployment rates for those of all educational levels also rose during the month. Those with at least a bachelor’s degree had a jobless rate of 4.3%, with the rate moving higher for those with less education. The jobless rate for those with less than a high school diploma? 13.3%!

We will get through this recession, but seeds of new growth will continue to be seen in other sectors besides and before employment.

Jeff Thredgold is an economic consultant to Zions Bank

Featured in the 8 April 2009 issue of Jeff Thredgold’s Tea Leaf newsletter.

*Artwork from Rob Sheridan under Creative Commons license at Flickr.com.