Job Markets Keep Getting Worse

651,000 jobs disappeared during the month of February according to the BLS.  This was the fourth month in a row with job losses over 600,000.   The unemployment rate is now at levels unseen since 1983.  We have an official unemployment rate of 8.1% but that belies a lot of stories including the number of people forced into part time jobs, the number of people so discouraged they have given up hope of finding a job, and the sectors and people who find themselves most vulnerable to this awful economy.  I’m not a labor economist and don’t do research in the area so I’m basically limited to what I know from teaching and attending my own basic economics classes.  The most important basic thing to know about labor markets is to dig in there into the break downs behind the unemployment rate for the full story.

Unemployment hits people differently.  That is why the major statistics are sliced and diced several different ways.  Age and ethnicity are frequent subcategories of interest.  Today’s unemployment statistics showed the usual story.

The unemployment rate continued to trend upward in February for adult men (8.1 percent), adult women (6.7 percent), whites (7.3 percent), blacks (13.4 percent), and Hispanics (10.9 percent). The jobless rate for teen-agers was little changed at 21.6 percent. The unemployment rate for Asians was 6.9 percent in February, not seasonally adjusted.

Asian unemployment is always the lowest followed by white unemployment.  The worst hit by unemployment are black teenage men whose unemployment rates can average about 30% even in the best of economies.  Do you know why women always manage to have lower unemployment rates than me?  Well, if you checked Heidi Li’s post on the wage gap, you have your answer.  Women are employed on the cheap and are much more likely to be kept on during a bad economy than their over paid male counterparts.   Older people generally fare better than younger.  That is just the last hired, first fired behavior of businesses trying to hold on to their loyal and most experienced employees.

Checking the unemployment rate by industry can also provide some insight.  MarketWatch takes today’s BLS numbers and explains the trends by industry.

The report raised doubt about expectations that the economy would recover sometime this year.Combing the details of the employment report offers little hope of improvement any time soon,” wrote Richard Moody, chief economist at Mission Residential, in a note to clients.

Job losses were widespread across industries. Only education and health services reported job gains.

According to the survey of business establishments, 660,000 jobs were lost in the private-sector in February. Goods-producing industries shed 276,000 jobs, while services lost 375,000.

Construction employment fell by 104,000 in February and the industry has shed 904.000 jobs since the recession began.

A leading indicator of labor market conditions – temporary-help services — saw 78,000 jobs lost in February.

Other large job losses in February occurred in transportation, financial services, and retail and wholesale trade.

Losses occurred in all industries but government.  Education and Health employment held rather steady.  This is typical of unemployment trends during the worst parts of a recession.  Government jobs are not determined necessarily by the state of the economy.  Education and Health jobs tend to be based on more on need and demand is not related to state of the economy.

Two groups that are carefully watched by labor statistics are discouraged workers.  These are folks that have been out of work so long that they have given up looking for a job and therefore cannot be counted in unemployment because they are not considered part of the labor force. Unemployment is considered to be 14.8% when these  discouraged job seekers and workers whose hours have been cut back to part-time are added to the unemployment.  This rate dates back to 1994 so we really can’t check the trend for this number compared to either the Great Depression or the Carter-Reagan recession of the 1980s.

Other labor market measures of interest were also reported by the BLS and the Market Watch summary.

Average hourly earnings rose by 3 cents, or 0.2%, to $18.47 an hour. Average wages have risen 3.6% in the past year.

The average workweek held steady at 33.3 hours for the third straight month.

The index for hours worked fell by 0.7%, consistent with gross domestic product falling at a 7% pace this quarter, said economists for Goldman Sachs. Hours in the factory sector dropped by 2% over the month.

The number of workers experiencing long spells of joblessness, defined by the government as 27 weeks without work, has risen to 2.9 million in February, up 1.6 million since the start of the recession.

These measures also show deepening problems.  Incomes are creeping up because the more experienced workers are retained and the lower-paid, less experienced are let go.  Workers are also out of  work for longer periods of time during recession, hence the need for extended unemployment benefits.

We’re beginning to see economists discuss the ramifications of these numbers as they begin to put them into models suggesting future trends.  This from the NYT.

The latest grim scorecard of contraction in the American workplace largely destroyed what hopes remained for an economic recovery in the first half of this year, and added to a growing sense that 2009 is probably a lost cause.

Most economists now assume that the American fortunes will not improve before near the end of the year, as the Obama administration’s $787 billion emergency spending program begins to wash through the economy.

“The current pace of decline is breathtaking,” said Robert Barbera, chief economist at the research and trading firm ITG. “We are now falling at a near record rate in the postwar period and there’s been no change in the violent downward trajectory.”

This article suggests that many of the jobs, like the jobs lost in the auto industry, may never come back.  This forces policy makers to consider increased spending on job training.  Again, from the NYT.

The acceleration has convinced some economists that, far from an ordinary downturn after which jobs will return, the contraction under way reflects a fundamental restructuring of the American economy. In crucial industries — particularly manufacturing, financial services and retail — many companies have opted to abandon whole areas of business.

“These jobs aren’t coming back,” said John E. Silvia, chief economist at Wachovia in Charlotte. “A lot of production either isn’t going to happen at all, or it’s going to happen somewhere other than the United States. There are going to be fewer stores, fewer factories, fewer financial services operations. Firms are making strategic decisions that they don’t want to be in their businesses.”

For American policy makers, such a reality poses fundamental challenges to the traditional response to hard times. For decades, the government has reacted to economic downturns by handing out temporary unemployment insurance checks, relying upon the resumption of economic growth to deliver needed jobs. This time, argues Mr. Silvia, the government needs to put a much greater emphasis on retraining workers for careers in other industries.

The analysis in WAPO is not any brighter.

Analysts say the pace of job cuts is likely to remain brisk for at least a few more months, because the demand for goods and services seems likely to remain very low as more consumers find themselves out of work. According to newly released data, the nation’s productivity, a measure of goods and services produced per hour, fell at the end of last year. That suggests that demand for goods has dropped even faster than employers have been shedding jobs. Those who have lost their jobs are not eager to open their wallets, analysts say, while many of those who remain employed are cutting back because of fears about job security.

Remember, without paying customers businesses will shorten their hours, lay off more employees, and decrease their use of raw materials, energy, transportation, office supplies, and a myriad of other wholesale services.  With the trend  showing those off the edge of the cliff numbers (just recheck that graph above), I’m thinking that any forecast based on an improved 2009 will be way off.  This includes the budget numbers and the stimulus plan.  The Obama Team may have to come back for seconds and thirds.  This still doesn’t solve the catalyst of this entire situation.  Banks are still hemorrhaging capital–this time from taxpayers in lieu of stockholders–to keep bondholders and creditors as bay.  We still have no serious proposed regulation for mortgage underwriting, financial innovations, or banking itself.  I can only say it’s going to get much worse while hoping I’m wrong.