Rightfully yours

Report from the U.S. Department of Labor statistics:

The not-so bad news:

• Nonfarm payroll employment continued to deteriorate this month (down 539,000), but slowed somewhat from last month’s decline (down 633,000). The number of unemployed persons increased by 563,000 (less than last month’s increase of 851,000). Total unemployment has risen from 11.6 million (7.6%) in January to 12.5 million (8.1%) in February to 13.2 million (8.5%) in March and 13.7 million (8.9%) in April.
• Since the recession began in December 2007, 5.7 million jobs have been lost across nearly all major private-sector industries. In the last 12 months, the number of unemployed has risen by 6.0 million persons. Long-term unemployed (jobless for 27 weeks and more) has risen by 2.4 million since December 2007, an increase of 500,000 when measured last month.
• Employment rose in the federal government due mostly to hiring of Census 2010 temporary workers. Health care employment grew by 17,000 last month. Other than that, job losses in April continued in most major private-sector industries.
• Manufacturing again led the month in losses (down 149,000 but less than March’s 161,000) with widespread job losses in the component industries and transportation accounting for more than half the decline.
• Professional and business services slipped into second place (down 122,0000 but less than last month’s 133,000). Construction job losses were third (down 110,000 but less than March’s 161,000). Finally, retail trade jobs dropped by 47,000.
• With approximately 1.9 million college graduates expected to enter the work force in May 2009 as graduates of four-year colleges, unemployment will get a huge increase, since many businesses are laying off employees rather than hiring.

April 2009

The total Civilian labor force stands at 154.7 million (up 683,ooo from March), roughly equal to the number at the end of 2008.  Of the increase from March, only some 120,000 found jobs.

There are 13.7 million people unemployed putting the rate at 8.9% of the available work force.  In modern times, this unemployment rate was last reached in September 1983. 

Comparing now with the final month of the last major downturn in November 1982, the total Civilian labor force then stood at 111.1 million.  In that month, there were 11.9 million people unemployed accounting for 10.8% of the available work force (average for the year was 10.6 million unemployed with the rate at 9.7%).

Unemployment: Spreads stayed relatively the same with the highest among teenagers at 21.5%, followed down by Hispanics, then African-Americans.  The lowest unemployment started with Asians at 6.6% followed up by Adult women at 7.1%, Whites, then Adult men. 

Note: The Census Bureau surveys 60,000 households across the country to insure an accurate demographic survey.  The unemployment rates are extrapolated from the survey results.  The figures for January 2009 include updated population estimates.

The quoted unemployment rate excludes people who have stopped looking for work because they believe no jobs are available (discouraged workers) and others outside the labor force.  They are counted separately.

Looking at jobs needed to reduce unemployment with the total Civilian labor force at 154.7 million:

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To restore employment to the 5.5% level of 2008, more than 5 million people will have to regain their job or new jobs.  It is a tall mountain to climb.  Add that the 1.9 million graduates from four-year colleges expecting to enter the work force.  Those going on to higher education will reduce that number.

With Nov 1982 unemployment at 10.2%, and the government taking aggressive action, it was still more than five years (April 1988) from the peak before unemployment receded to 5.4%. 

The approach that time, however, was to fix the economy at the expense of the worker.

The president’s $787 billion stimulus bill signed into law hopes to create about 3.5 million jobs.  Lower estimates put that figure at 2 to 2.5 million jobs by the end of 2010, reducing the unemployment rate to 7+%. 

Some compare the the fall in employment to 1974-1975 and 1981-1982. If the comparison is accurate, the peak in unemployment may be reached within the next five to six months (past performance is no guarantee of the future).

Economist William Polley made a chart  that includes every recession since World War II.  It makes the chart pretty hard to read, so he simplified it with selected post-WWII recessions.

William Polley’s chart shows how the recovery from the 2001 recession took four years for employment to return to its February 2001 peak. 

I have analyzed things a little differently, using the Department of Labor unemployment tables of unemployment rates and 5.5% as the “normal” rate of unemployment.  Of course, along the way, the Civilian labor force increases, so the percentages represent ever more workers.

The following table shows unemployment start dates, peaks and returns to the normal rate of 5.5%, Civilian labor force in millions of workers for that year, and the lengths of times from the start date in months:

Recession peaks 1974-2008

Note that the unemployment peak period that started in 1974 and ended in 1979 (lasting nearly five years) was followed immediately by another peak period ending nearly nine years later.  By the end of that period, the work force had increased by more than 32%, meaning overall, almost 30 million new jobs had to be created.

The aggressive increase in the Civilian labor force in that period can likely be attributed to post-World War II babies (baby boomers born between 1946 and 1964) reaching adulthood, with some entering the labor force after secondary school and the rest entering the workforce after further education.

The periods from 1988 to 1990 and 1995 to 2008 were periods of prosperity, with low unemployment (but a building bubble).  Here is the same data in graphic form:

Unemployment rates

It is interesting to recognize that in most cases, unemployment peaks roughly one-third of the timeline for unemployment to return to its “normal” rate, so we can double the number of months from the Start to the Peak to expect to arrive at an approximate return to “normal.”

We live in hope (again, past performance is no guarantee of the future).

Ed.Note: According to a recent New York Times/CBS News poll (April 6) of 998 adults showed that Americans have grown more optimistic about the economy, since Barack Obama took office as president. The number of people that think the country is headed in the right direction jumped to 39 percent from 15 percent during the final days of President George W. Bush’s administration. The number of people who still think the country is headed in the wrong direction dropped to 53 percent from 79 percent.

A senior White House official stated that the Obama administration’s fiscal stimulus plan will meet their previous estimates to save 3.5 million U.S. jobs by the end of 2010, but the unemployment rate at that time may be higher due to further deterioration in the economy.  White House officials have been careful to point out that estimated jobs created and saved have merely slowed continued job losses.

The White House Council of Economic Advisers on Monday released a report showing the plan would save or create 1.5 million jobs by the end of 2009 and 3.5 million by the end of 2010.  All recipients of stimulus funding are required to report jobs retained and created by the funds.