Rightfully yours

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

Employment:

Nonfarm payroll employment restarted its decline (down 85,000) after virtually stopping in its tracks (up 4,000 [revised]) in November.  This December drop could substantially be the result of seasonal employees let go by retailers.  The slowdown trend continued (127,000 [revised] in October, 139,000 [revised] in September, 201,000 in August [revised], 304,000 in July [revised], 467,000 in June, 345,000 in May, 539,000 in April and 633,000 in March).  

Over the 12 months ending in November, hires totaled 49.9 million and separations totaled 54.4 million, yielding a net employment loss of 4.5 million. 

In 2009, payroll employment declined by 4.5 million. Over the course of the year, job losses moderated considerably. In the first quarter of 2009, job declines averaged 691,000 per month, compared with 69,000 per month in the last quarter.

The 3-month average job layoff figures have been improving steadily.  December through October was 69,333 [revised], September through July was 214,667 [revised], and June through April was 450,333. 

Since the start of the recession in December 2007, payroll employment has decreased by 7.3 million, wiping out all the jobs created in the private sector over the last decade.    

Total unemployment has risen to 15.3 million (10.0%) from 7.7 million (5.0%) in December 2007 and from 11.6 million (7.6%) in January 2009. 

The numbers still indicate that companies are approaching their maximum “leanness” and sustain perceptions that the economy is approaching employment recovery.

Unemployment is still the highest since April 1983.  In a healthy economy, around 125,000 jobs a month must be added and filled just to keep the unemployment rate stable.

The current rate is 10.0% and the number unemployed is at 15.3 million. 

This is the second consecutive month of unemployment holding steady.

The number of persons working part time for economic reasons (sometimes referred to as involuntary part-time workers) was unchanged in November at 9.2 million.  Previous month part time figures were November (9.2 million), October (9.3 million), September (9.2 million), August (9.1 million), July (8.8 million) and June (9.0 million).  

These persons had their hours cut back or were unable to find full-time jobs.  Since the start of the recession, the number of such workers has increased by 4.4 million, and has remained relatively constant since March 2009. 

Long-term unemployed persons (jobless for 27 weeks and more) have tripled since the start of the recession to 6.1 million since December 2007, adding 229,000 to that number in November.  Four in ten (39.8%) unemployed persons are in this category. 

The average length of unemployment has risen to more than 29 weeks, the longest on record since 1948.

There were 929,000 discouraged workers in December, up from 861,000 in November and 608,000 a year ago.  Discouraged workers are persons no longer looking for work.

Ed.Note: The number unemployed (and the unemployment rate) includes only those who looked for work in the last 4 weeks, and changes as the Civilian labor force population varies. 

The number unemployed contrasted with the changes in payroll employment is accounted for by workers no longer looking for work and therefore dropping out of the Civilian labor force. 

As consumer and business confidence improves, more workers will start to look for jobs again, returning to the workforce in anticipation of better employment conditions, which drives the unemployment rate higher.  On the other side, workers drop from the work force for a number of reasons including giving up looking for work.

Industry sectors

Construction dropped by 53,000 jobs in December, perhaps due to inclement weather and low temperatures.  Previous month losses were November (27,000), October (62,000), September (64,000), August (65,000), July (76,000), June (79,000), May (59,000), April (110,000), and March (161,000), with a total of 1.6 million since December 2007.  The average for May through October was 63,000 and 117,000 for the six months preceding that.  Total employment in construction has dropped by 1.6 million jobs since the recession began.  

Manufacturing dropped 27,000 jobs in December.  Previous month losses were November (41,000), October (61,000), September (51,000), August (63,000), July (52,000), June (136,000), May (156,000), April (149,000) and March (161,000) with widespread job losses totaling 2.1 million since December 2007, mostly in the durable goods industry.  The average job loss for July through December was 41,000, while January through June was 171,000.

General merchandise store employment dropped 15,000 jobs, as seasonal workers were no longer needed.  Retail added 8,000 department store jobs in November as merchants geared up for the holiday season.  Previous month losses were October (40,000), September (39,000), August (9,600), July (44,000), June (18,000), and April (47,000). 

Education and health services continued to add jobs, with health care payrolls increasing by 22,000 in December.  Positive previous months were November (21,000), October (45,000), September (19,000), August (52,000), and July (21,000).  The health care industry has added 631,000 jobs since December 2007.

Professional and business services added 50,000 jobs in December.  Previous changes were increases in November (86,000), October (18,000) and September (3,000), and losses in August (22,000), July (38,000), June (118,000), May (51,000), April (122,0000), and March (133,000).  

Temporary help services added 47,000 jobs in December, a net gain of 166,000 jobs since the low point in July.

Government employment lost 21,000 jobs in December, mostly USPS employees (12,600).  Previous changes were increases for November (7,000) and October (46,000).  Losses were registered in September (53,000), August (18,000) and July (28,000).

Unemployment spreads stayed relatively the same with the highest among teenagers (27.1%), followed down by African-Americans, then Hispanics.  The lowest unemployment started with Adult women (8.2%) followed up by Asians (8.4%), Whites then Adult men (10.2%). 

The good news from this data is that the job losses are lessening.  It is perhaps due to fewer jobs available to lose, but the lower figures are an encouraging sign. 

The average manufacturing workweek remained unchanged at 40.4 hours with overtime at 3.4 hours.  This figure closely correlates with overall output and gives clues (when workweek hours increase) on when firms will start hiring. 

Average hourly earnings remained at $18.80 for December.  Over the past 12 months average hourly earnings have risen 2.2%.  

Workforce:

The total Civilian labor force stands at 153.0 million (down 661,000 from November).  There are nearly two million fewer workers in the work force than in June 2009 (154.9 million).   These are generally workers who have given up looking for work. 

The Civilian labor force usually grows as a recession winds down and optimism about finding work grows.  But as long as Americans remain anxious about their jobs, consumer spending is not expected to grow enough to power an economic rebound. 

The employment population ratio, at 58.2 percent, has declined by 4.5 percent since the recession began in December 2007.

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%). 

Looking at jobs needed to reduce unemployment
with the total Civilian labor force at 153.0 million:

(r)=revised

To restore employment to the 5.5% level of 2008, about 6.8 million people will have to regain their job or start new jobs.  It is a tall mountain to climb. 

Ed.Note:  Government and economists foretell that the “normal” unemployment rate will move up to 8% from its current 5.5% level.  With the current Civilian labor force, that means that on a permanent basis there will be roughly 13 million people unemployed — more than 4.5 million more than at the “normal” level today. 

Data collection:

The Census Bureau surveys 60,000 households across the country to insure an accurate demographic survey.  This translates into about 110,000 individuals.  All the counties and county-equivalent cities are grouped into 2,025 geographic sampling units.  824 of these units are selected to accurately represent the entire population of the United States.  For a detailed explanation, see the BLS Handbook of Methods. 

Each month, one-fourth of the interviewed households are rotated out.  They rejoin the sample after eight months, are interviewed for another four months, and then are rotated out forever. 

Each month, 2,200 highly trained Census Bureau employees conduct interviews in the sample households for information on labor force activities (job holding and job seeking) or non-labor force status of household members. 

This sampling method results in a 90+ percent probability that the results will be within 290,000 of the 153 million people in the Civilian labor force.  A monthly total census would be cost-prohibitive. 

Questions are specifically formulated so that neither the interviewer nor the persons interviewed decide their labor force classification.  This prevents the sample from being distorted by respondents providing answers based on their opinion or what a “right” answer should be. 

The basic concepts of employment are: 

The unemployment rates are extrapolated from the survey results. 

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. 

Their number has nearly doubled in the previous 12 months.

 Stimulus (Recovery Act):

The president credits his $787 billion stimulus package of tax cuts and increased government spending with improving employment.   He 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 8+%. 

The Fed’s record-low interest rates, along with other moves to drive down loan rates and stimulate borrowing, have supported the economic rebound.

The White House Council of Economic Advisers 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. 

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 president is now drafting a proposal to try to stimulate more hiring.  Obama plans to send Congress a list of ideas, including new tax breaks for small businesses that hire, some new spending on roads, bridges and other construction and grants to state and local governments to avoid layoffs.  Congress is likely to take up a job-creation package in the New Year.

***Stimulus spending by state: 

As of January 5, 2010, of the
$328,417,898,346 announced,
$313,900,089,021 (95.6%) has been made available
$164,246,301,846 (50.0%) has been paid out to the states

http://www.recovery.gov/Pages/TextView.aspx?data=homeMap

 Recession histories:

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.

Some compare 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 four to five 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. 

Using the Department of Labor unemployment tables of unemployment rates and 5.5% as the “normal” rate of unemployment, I have analyzed things a little differently.  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 1974-2009 

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 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).