Broader Measure of U.S. Unemployment Stands at 17.5%
For all the pain caused by the Great Recession, the job market still was not in as bad shape as it had been during the depths of the early 1980s recession — until now.
With the release of the jobs report on Friday, the broadest measure of unemployment and underemployment tracked by the Labor Department has reached its highest level in decades. If statistics went back so far, the measure would almost certainly be at its highest level since the Great Depression.
In all, more than one out of every six workers — 17.5 percent — were unemployed or underemployed in October. The previous recorded high was 17.1 percent, in December 1982.
This includes the officially unemployed, who have looked for work in the last four weeks. It also includes discouraged workers, who have looked in the past year, as well as millions of part-time workers who want to be working full time.
The official jobless rate — 10.2 percent in October, up from 9.8 percent in September — remains lower than the early 1980s peak of 10.8 percent.
The broader rate is highest today, sometimes 20 percent, in states that had big housing bubbles, like California and Arizona, or that have large manufacturing sectors, like Michigan, Ohio, Oregon, Rhode Island and South Carolina.
The new benchmark is a sign of just how much damage financial crises tend to inflict. A recent book by Carmen M. Reinhart and Kenneth S. Rogoff, two economists, found that over the last century the typical crisis had caused the jobless rate in the country where it occurred to rise for almost five years. By that standard, the jobless rate here would continue rising for two more years, through the end of 2011.
Most economists predict that the rate will in fact begin to fall next year, largely because of the federal government’s aggressive response — fiscal stimulus, interest-rate cuts and a variety of creative steps by the Federal Reserve and Treasury Department. Friday’s report showed that monthly job losses continued to slow recently, though the improvement has been gradual.
At the White House Friday, President Obama signed a bill to extend unemployment benefits and a tax credit for home buyers, and said that he was looking at ways to enact more stimulus. On Wednesday, the Fed announced that it expected to leave its benchmark interest at zero for “an extended period.”
Nearly 16 million people are now unemployed and more than seven million jobs have been lost since late 2007.
Officially, the Labor Department’s broad measure of unemployment goes back only to 1994. But early this year, with the help of economists at the department, The New York Times created a version that estimates it going back to 1970. If such a measure were available for the Depression, it probably would have exceeded 30 percent.
Compared with the early 1980s, a smaller share of workers today are officially unemployed and a smaller share are considered discouraged workers.
But there are many more people who would like to be working full time and have been able to find only part-time work, according to the government’s monthly survey of workers. The rapid increase in their ranks and in the officially unemployed has caused the rate to rise much faster in this recession than in the early 1980s. Two years ago, it was only 8.2 percent.
One of the more striking aspects of the Great Recession is that most of its impact has fallen on a relatively narrow group of workers. This is evident primarily in two ways.
First, the number of people who have experienced any unemployment is surprisingly low, given the severity of the recession. The pace of layoffs has increased, but the peak layoff rate this year was the same as it was during the 2001 recession, which was a fairly mild downturn. The main reason that the unemployment rate has soared is the hiring rate has plummeted.
So fewer workers than might be expected have lost their jobs. But those without work are paying a steep price, because finding a new job is extremely difficult.
Second, wages have continued to rise for most people who still have jobs. The average hourly wage for rank-and-file workers, who make up about four-fifths of the work force, actually accelerated in October, according to the new report.
Even though some companies have cut the pay of workers, the average hourly wage has still risen 1.5 to 2.5 percent over the last year, depending on which government survey is examined. Average weekly pay has risen less — zero to 1 percent — because hours have been cut. But average prices have fallen. Altogether, the typical worker has received a 1 to 2 percent inflation-adjusted raise over the last year.
In the other two severe recessions in recent decades, workers with jobs fared considerably worse. At the same point in the mid-1970s downturn, real weekly pay had fallen 7 percent; in the early 1980s recession, it had fallen 4 percent.
It is a strange combination: workers who still have a job are doing better than in other deep recessions, but the unemployment and underemployment have risen to their highest level since the Depression.
Unemployment rate hits 10.2%, a 26-year high
Payrolls fall by 190,000 in October, 22nd straight decline
WASHINGTON (MarketWatch) – In another sign that workers are being left out of the budding economic recovery, the U.S. unemployment rate climbed to 10.2% in October, topping the 10% mark for the first time in 26 years.
Nonfarm payrolls dropped by a seasonally adjusted 190,000 in October, bringing to total number of jobs lost in the recession to 7.3 million, the Labor Department reported Friday. It was the 22nd straight monthly decline in payrolls.
Large losses were seen in manufacturing, construction and retail employment. Health care and temporary-help agencies added jobs. Read the full government report.
The October jobs report shows a growing disconnect between a recovery in economic output and continued job losses. The economy grew at a 3.2% annual rate in the third quarter, with productivity rising at a 9.5% rate.
“The grinding pace of progress in labor markets likely flags a tepid economic recovery,” wrote Sal Guatieri, an economist for BMO Capital Markets.
With unemployment remaining elevated and no sign of job growth, the Federal Reserve could be expected to keep its interest rate target at virtually zero, economists said. Read commentary on the Fed and jobs.
The jobs report was worse than expected. Economists surveyed by MarketWatch were forecasting a rise in the unemployment rate to 10%, with 150,000 lost payroll jobs. An upward revision to August and September payrolls cushioned some of the disappointment, however. See Economic Calendar.
The seasonally adjusted unemployment rate of 10.2% was the highest since April 1983.
Unemployment rose by 558,000 to 15.7 million, the government said. Of those, 5.6 million had been out of work longer than six months, representing a record 35.6% of the unemployed.
President Barack Obama signed a law on Friday extending unemployment benefits to as much as 99 weeks in hard-hit states. The bill includes an extension of a home-buyer tax credit, and a tax break for small businesses. See full story.
Republican lawmakers said rising unemployment proves that Democratic policies aren’t working. “Americans are asking ‘Where are the jobs?’ but all they’ve gotten from Democrats in Washington is more spending and more debt,” said Rep. John Boehner, R-Ohio, the Republican leader in the House.
The October report showed that just 58.5% of adults were working, the lowest since 1983, and down from about 63% before the recession.
An alternative gauge of unemployment, which includes discouraged workers and those forced to work part-time, rose to 17.5%, the highest on record dating to 1995.
The report wasn’t universally grim. Among the positives in the report: Payrolls were revised up by 91,000 over the previous two months. Hourly earnings increased. Average hours worked in manufacturing rose. Temp-help agencies were hiring.
The October employment report was “a mild disappointment,” wrote Stephen Stanley, chief economist for RBS Securities. It was “not a disaster but certainly not as positive as we had expected. The bad news is that the jobs situation seems to have stalled out after improving dramatically through the summer.”
Details
Total hours worked in the economy fell 0.2%. The average workweek was steady at a record-low 33 hours.
Average hourly earnings rose 5 cents or 0.3%, to $18.72. Average hourly earnings are up 2.4% in the past year.
In September, payrolls fell by a revised 219,000, compared with the previous estimate of a 263,000 loss. The unemployment rate was 9.8% in September.
Payrolls in August and September were revised higher by a total of 91,000.
In its survey of 400,000 business establishments, the government found that private-sector employment fell by 190,000 to 130.8 million in October. Government employment was unchanged.
Employment in the goods-producing sector fell by 129,000, including 62,000 in construction and 61,000 in manufacturing. The average workweek in manufacturing rose to 40 hours from 39.9, the highest in 11 months.
Service-producing jobs fell by 61,000, including 40,000 in retail.
The only major sectors adding jobs were health care and education (up 45,000) and professional and business services (up 18,000). Temp-help agencies – a key leading indicator – added 34,000 jobs, the first significant increase since the recession began 22 months ago.
Of 271 industries, 33.8% were hiring in October, down from 37.5% in September.
In its survey of 60,000 households, the government found that employment fell by 589,000. The jobless rate for men rose to 10.7%, and it rose to 8.1% for adult women. The jobless rate for blacks rose to 15.7%, compared with 9.5% for whites and 13.1% for Hispanics.
The jobless rate for those with a college degree fell to 4.7% from 4.9%. For those without a high school diploma, the jobless rate rose to 15.5% from 15%. For those with a high school degree, but no college, the rate rose to 11.2%.
Jobless rate rises to 10.2% in October
It’s likely to go higher, could threaten economic recovery
WASHINGTON — The unemployment rate has hit double digits for the first time since 1983 — and is likely to go higher.
The 10.2% jobless rate for October shows how weak the economy remains even though it is growing. The rising jobless rate could threaten the recovery if it saps consumers’ confidence and makes them more cautious about spending as the holiday season approaches.
The October unemployment rate — reflecting nearly 16 million jobless people — jumped from 9.8% in September, the Labor Department said Friday. The job losses occurred across most industries, from manufacturing and construction to retail and financial.
Michigan’s rate for September is 15.3%.
Economists say the unemployment rate could surpass 10.5% next year because employers are reluctant to hire.
President Barack Obama called the new jobs report another illustration of why much more work is needed to spur business creation and consumer spending.
Noting legislation he’s signing to provide additional unemployment benefits for laid-off workers, Obama said, “I will not rest until all Americans who want work can find work.”
The government’s monthly unemployment report is based on two surveys, one of households, one of companies’ payrolls. The household survey showed that about 558,000 more people were unemployed last month than in September, raising the total to 15.7 million. The company survey, however, showed only a third as many job losses — 190,000.
The disparity can be explained by the fact that the company survey doesn’t count people who are self-employed and undercounts employees of small businesses.
That’s why some analysts, like Diane Swonk, chief economist at Mesirow Financial, say last month’s household survey could be an ominous sign for the economy.
Unemployment rate rises to 10.2%
It’s the first time it has hit double digits since 1983. Employers cut 190,000 jobs last month, a bigger drop than expected.
Reporting from Washington – The nation’s unemployment rate jumped to 10.2% in October, raising questions about the staying power of the budding economic recovery and confronting President Obama with a politically explosive new challenge.
Not since 1983, after a double-dip economic downturn had sent the auto, steel and housing industries plunging, has the jobless rate gone so high. And many economists predict that it will go higher still in coming months — and remain high for most if not all of next year.
Some 15.7 million workers now have no jobs, the government said in releasing its monthly unemployment report, and an estimated 5 million more are working fewer hours and drawing smaller paychecks than they were before the country fell into the worst recession in a generation.
In an effort to blunt the effect of the dismal news, Obama made a point of signing legislation Friday that provides additional aid for the jobless and expands and extends tax credits for home buyers.
But few economists thought either measure would substantially change the worsening employment picture or solve the president’s increasingly urgent political problem: how to spur the creation of more jobs — and quickly.
Although most analysts had expected the unemployment rate to rise from September’s 9.8%, the increase was larger than expected. And a separate count of the number of jobs on employer payrolls fell by 190,000 last month, a bigger drop than expected.
In California, where unemployment was 12.2% in September, the rate for October will be reported Nov. 20.
The higher U.S. jobless rate was particularly disturbing because it was not the result of a flood of new workers into the labor market, something that often occurs when the economy begins to climb out of a recession. Rather, the latest downturn reflects a continuing decline in the number of people with jobs.
“I’m more nervous about the staying power of the recovery after today’s numbers,” said Mark Zandi, chief economist at Moody’s Economy.com. He said he now expected joblessness to stay in double digits throughout next year, climbing to as high as 11%.
That level of unemployment, stretching as it does over most of the country instead of being confined to one hard-hit region the way the Rust Belt was hit in the early 1980s, presents Obama and his Democratic colleagues in Congress with both economic and political challenges.
On the political front, a bad economy threatens the Democrats’ control of Congress as the 2010 off-year elections approach.
Hitting double digits will have an immediate psychological effect across the country, said Robert Reich, who was secretary of Labor during the Clinton administration.
It’s “an important political threshold” and will probably force the administration’s hand on additional steps to stimulate jobs, said Reich, who now teaches at UC Berkeley.
The Democrats’ political vulnerability was clear in the reaction of congressional Republicans.
“The president himself has said that job creation is the ultimate measure of economic performance,” House Minority Leader John A. Boehner (R-Ohio) said. “Today’s report is just another reminder that American families and small businesses are still struggling as the White House response continues to fall short.”
For his part, Obama spotlighted congressional action to extend jobless benefits by 14 weeks in all states and 20 weeks in hard-hit states such as California. The legislation also extends until April 30 a popular tax credit of as much as $8,000 for first-time home buyers. It raises the income limits for the credit and creates a separate credit of up to $6,500 for people who already own a home and are buying one to move into.
Speaking in the Rose Garden, Obama said that his administration had succeeded in stopping “the free fall of the economy” and that his economic team was considering ideas to create jobs. He mentioned additional spending on roads and bridges, further tax cuts for business, steps to make more credit available to small businesses and new efforts to promote U.S. exports.
The October job report contained at least two bright spots. One was that the decline in the number of payroll jobs was once again smaller than the month before. And the number of temporary jobs increased, which often happens before the number of jobs overall starts to climb.
Absent government action, however, those developments and other factors point toward a slow labor market recovery.
What’s worse from the White House perspective is the fact that its policy options are limited, both politically and in terms of effectiveness.
Some economists say that what’s really needed is another stimulus package like the $787-billion spending bill approved by Congress in February.
That is considered a political non-starter. Republicans are already attacking the first stimulus as a failure that needlessly inflated the federal deficit. And congressional Democrats, who pared back the February stimulus out of concern about voters’ reaction to more spending, have little stomach for a second round.
But most economists say the February legislation and other stimulus efforts such as the “cash for clunkers” program have helped the economy turn the corner, with economic output growing in the third quarter at a 3.5% annual rate after four straight quarters of contraction.
The return to growth prompted economists to declare that the worst recession since World War II was over. And the White House has said that the stimulus created or saved 1 million jobs.
Obama and his advisors have repeatedly called for patience, saying that job growth always lags behind broader economic growth.
Regardless, the Obama administration said in January that unemployment would not top 8% this year if the stimulus was approved, a projection that has since been revised.
“We are looking to move forward in exploring options further in the coming weeks, not months,” a senior administration official said Friday, tacitly acknowledging the new pressure on the White House.
The jobless rate when Obama took office was 7.6%, and it was a mere 4.9% in December 2007, when the latest recession officially began. Since then, the number of unemployed workers has increased by 8.2 million, according to the Bureau of Labor Statistics.
And the government doesn’t count as officially unemployed the so-called discouraged workers who have given up looking for jobs — and who numbered 808,000 last month, up from 484,000 a year earlier.
There also were 9.3 million people who reported that they were working part time because their hours had been cut or they could not find full-time jobs. If this group and discouraged workers are included, along with others on the fringe of the labor market, the nation’s rate of unemployment plus underemployment in October was 17.5%.
Jobs Report: Economists React
(Published November 6, 2009)By R.M. Schneiderman
Update | 12:15 p.m.
“It will put more political pressure on Congress and the Administration to “do something,” but in our view, there is no political will to do anything right now, especially with the 2010 midterm elections looming.”—John Canally, LPL Financial
– The American unemployment rate rose to 10.2 percent in October, the highest level in more than 26 years, according to a report by the Labor Department on Friday. Here is how economists and other analysts reacted:
“If you had told everyone last Election Day what would happen, economically, in 2009, what policies would they have adopted then to stem this disaster? And why aren’t we implementing those policies now?” — Brad DeLong, University of California, Berkeley
“We expect job declines to continue to ease, since we expect that productivity gains will slow, and firms will find that they must bring in new workers to keep output growing. The extra boost provided by the hiring of Census workers should probably be enough to turn employment growth positive by March.” — Nigel Gault, IHS Global Insight
“Today the unemployment rate passed 10 percent, a sort of brutal milestone The thing to do, I guess, is to keep making the case for doing more; in particular, we can hope that centrist Democrats will finally realize that timid economic policies are hurting their own electoral prospects. But it’s an uphill fight.” — Paul Krugman, Princeton University
“Perhaps a timeout is in order in the debate over health care, so the president’s political capital can be used to address problems in the labor market. Finding employment for the 15.6 percent of those aged 20 to 24 and 10.8 percent of those between 25 and 34 — both key demographic groups partially responsible for the president’s electoral success — should be a priority, even if that means the necessary reform of the health care system is pushed back until 2010.” — Joseph Brusuelas, Moody’s Economy.com
“The bottom line is that although labor market deterioration is clearly not occurring at the pace suffered late in 2008 and early this year, conditions remain brutal. Moreover, we continue to believe that the healing process will be a slow one, and that households will be contending with weak income growth and balance sheet issues for some time.” — Joshua Shapiro, MFR Inc.
“We have argued and continue to argue that another jobless recovery is materializing and if our estimates for G.D.P. growth going forward materialize, the unemployment rate will remain at elevated levels for several years. Nearly 16 million people are unemployed right now while another 9 million are working part-time jobs because they cannot get a full-time job. Substantial economic growth is necessary to put these people back to work and account for new labor force entrants and account for a return of those who have left the labor force.” — Dan Greenhaus, Miller Tabak and Co.
“Over all, this recovery is shaping up to be a ‘jobless’ one, just like the last two. Our concern is that unlike the last recovery, with credit still tight, households aren’t going to be able to smooth their consumption using credit until the labor market eventually strengthens.” — Paul Ashworth, Capital Economics Ltd.
“The sharp jump in the unemployment rate is likely to spur policy makers to consider new measures to stimulate job creation. For example, after the September report, there was talk of enacting a new-job tax credit. We believe that such a measure — if designed correctly — could represent an important source of effective stimulus. We continue to see signs that the labor market will begin to show job growth in early 2010. But, it now appears that the unemployment rate will hit 10.5 percent — or even a bit higher.” — David Greenlaw and Ted Wieseman, Morgan Stanley Research
Nation’s unemployment rate at 10.2% in October
The nation’s unemployment rate hit 10.2 percent in October, reflecting the economic pain of the 16 million jobless Americans, as well as the strain felt by the 138 million others who are working harder to earn their paychecks.
A report issued Friday by the Labor Department said the jobless rate jumped from 9.8 percent in September to its highest level since 1983.
“This may be the toughest employment situation we’ve seen in the postwar era,” said Mark Gertler, an economics professor at New York University.
The economy lost 190,000 jobs in October, the 22nd consecutive monthly decline and the longest losing streak on record dating back 70 years.
The sour U.S. report means that California’s unemployment rate, which was 12.2 percent in September, is likely to head higher when state officials issue their October totals in two weeks.
In San Francisco, PG&E said Friday that it is cutting 500 jobs, 2.4 percent of its 21,000-person workforce, most of them management positions. About three-quarters of the cuts will occur in the Bay Area in what a spokesman said was the utility’s first layoffs since the recession began.
Extended benefits
In Washington, President Obama signed a bill extending unemployment benefits up to 20 weeks for those who have already exhausted the 79-week maximum in California.
“I will not rest until all Americans who want work can find work,” he said.
Friday’s report quantifies the difficulties facing job hunters.
The median duration of unemployment in October was 18.7 weeks, meaning half of all those looking for work needed less time and the rest needed more time to find a job. A year ago the median job hunt lasted 10.7 weeks.
The report also reveals the hidden weakness in the labor market.
Underemployed
In addition to the nearly 16 million Americans who are jobless, another 9.3 million people worked part time in October because they couldn’t get full-time work, while another 1 million wanted jobs but were too discouraged to look.
The Labor Department combined all three groups into what is called an underemployment rate, which stood at 17.5 percent in October. The underemployment rate for California was 21.9 percent in September.
Meanwhile, working Americans are cranking up their output to meet the increasing demand reflected in the nation’s gross domestic product, which rose 3.5 percent in the third quarter, technically signaling an end to the recession.
Higher productivity
The Labor Department said labor productivity rose at an annual rate of 9.5 percent in the third quarter. “For fear of losing jobs, the current employees are working harder,” said Sung Won Sohn, an economics professor at California State University Channel Islands.
Fred Fraenkel, investment chief with Beacon Trust Company of New Jersey, said employers are likely to put off job creation as long as they can, by working existing staff harder and bringing part-timers back to full shifts before they take on new workers.
Fraenkel predicted that in the first half of 2010, employers won’t be able to rely on productivity gains or added hours to meet demand and will have to start hiring.
Friday’s report hinted that this process might be under way, as the temporary work sector added 34,000 jobs.
“Firms are beginning to dip their toes back into the hiring waters,” said national economic forecaster Joel Naroff, president of Naroff Economic Advisers.
Bleak conditions
But for the millions of unemployed, the situation is still bleak.
San Francisco resident Jason McKinnon lost his job as a video game software analyst in April and, despite an active search and some interest, he has yet to find work.
“I’m feeling like there’s less jobs out there and more qualified people,” he said.
