Rightfully yours

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

The bad news:

• Nonfarm payroll employment continued to deteriorate sharply this month (down 633,000). The number of unemployed persons increased by 851,000 bringing the total unemployment from 11.6 million (7.6%) in January up to 12.5 million (8.1%) in February to 13.2 million (8.5%) in March.
• Employment has declined by 5.1 million since December 2007 with almost two-thirds (3.3 million) occurring in the last five months. In that same time period, the unemployment rate has risen by 3.4 percent.
• In March, the number of persons working part time for economic reasons (sometimes referred to as involuntary part-time workers) climbed by 423,000 to 9.0 million.
• Job losses were large and widespread across nearly all major industry sectors. Manufacturing led the month in losses (down 161,000) with widespread job losses in the component industries, followed by construction (down 126,000) and professional and business services (down 133,000).
• Retail trade has lost an average of 44,000 jobs per month since November 2007. Since December 2007, leisure and hospitality has declined by 351,000 jobs and transportation has declined by 265,000 jobs.
• 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.

 
March 2009

The total Civilian labor force stands at 154.0 million (down 166,ooo from February).  There are 13.2 million people unemployed (up 851,000) putting the rate at 8.5% of the available work force.  In modern times, this unemployment rate was last reached in September 1992 and only in the 1980 – 1986 years before that. 

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%).

The number of those jobless for 27 weeks or more increased to 3.2 million in March.  Since December 2007, the number of long-term unemployed was up by 1.9 million.

Unemployment: Spreads stayed relatively the same with the highest among teenagers at 21.6%, followed down by African-Americans and Hispanics.  The lowest unemployment started with Adult women at 7.0% followed up by Asians, Whites and 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 154.0 million:

To restore employment to the 5.5% level of 2008, nearly 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 6%. That will do for a start.

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 at 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.

The next Economic Jobs report will be found at:
Economic Picture: April 2009

The last Economic Jobs report will be found at:
Economic Picture: February 2009