Revisions to Jobs Report Show a Further Erosion in US Labor Market

In the nation's two most populous states, three new reports point to a continuing weakness in the labor market. In the Lone Star State, The Texas Workforce Commission (TWC) is expected to release its monthly jobs report for January that will revise upwards the jobs losses. Indeed, Federal Reserve Bank of Dallas recently released its own benchmark report which found that Texas had lost a total of 329,000 payroll jobs in 2009 or 53,000 more than 276,000 reported by the Commerce Department.

Much of the weakness in the Texas job picture is in the Dallas MSA, the state's second largest. The Dallas area lost nearly 83,000 jobs between December 2008 and December 2009, according to the Dallas Fed. That's nearly double the 42,000 or so local job losses the TWC estimated in January for the same period.

Overall, the Texas job market is performing better than the national one. Still, the state's unemployment rate rose to 8.3 percent in December, up from 8 percent in November.

In nation's most populous state, the situation is even bleaker. The San Jose Mercury News reports that the California lost far more jobs last year than the state initially reported. According to an estimate from the state Employment Development Department, California employers shed 871,000 jobs in 2009. If that estimate holds up when final revisions are released this month, California's job losses would be far more grim than first believed. The agency reported as recently as Jan. 22 that California employers chopped 579,000 jobs from payrolls in 2009. In short, California lost 292,000 more jobs than first reported.

California's unemployment rate stood at 10.1 percent in January 2009 but climbed to over 12.1 percent over the course of the year. The latest report from the Bureau of Labor Statistics showed the unemployment rate in the Golden State at 12.4 percent.

US Unemployment Rate Falls to 9.7%

The Bureau of Labor Statistics reported on Friday that the US unemployment rate fell from 10.0 to 9.7 percent in January. That's the lowest rate since August. The report is better than expected with most economists predicting a flat to slight uptick. Forecasts had ranged from 9.8 percent to 10.3 percent.

Non-farm payroll employment fell by 20,000 in January compared with a revised 150,000 drop decline in December. The January number reflects a drop off in construction jobs and a further erosion in state and local government services. Government payrolls decreased by 8,000 in January. State and local governments reduced employment by 41,000 during the month, while the Federal government added 33,000. The increase at the Federal level reflected in part the hiring of temporary workers to conduct the 2010 census. Also providing a lift were the temporary service sector and the retail sector. The number of temporary workers increased 52,000 in January. Retail payrolls increased by 42,000 after an 18,000 decline in December.

 

In January, unemployment rates for most major worker groups--adult men (10.0 percent), teenagers (26.4 percent), blacks (16.5 percent), and Hispanics (12.6 percent)--showed little change. The jobless rate for adult women fell to 7.9 percent, and the rate for whites declined to 8.7 percent. The jobless rate for Asians was 8.4 percent, not seasonally adjusted.

In January, the number of persons unemployed due to job loss decreased by 378,000 to 9.3 million. Nearly all of this decline occurred among permanent job losers.

The number of long-term unemployed (those jobless for 27 weeks and over) continued to trend up in January, reaching 6.3 million. Since the start of the recession in December 2007, the number of long-term unemployed has risen by 5.0 million.

In January, the civilian labor force participation rate was little changed at 64.7 percent. The employment-population ratio rose from 58.2 to 58.4 percent.

The number of persons who worked part time for economic reasons (sometimes referred to as involuntary part-time workers) fell from 9.2 to 8.3 million in January. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

About 2.5 million persons were marginally attached to the labor force in January, an increase of 409,000 from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

Among the marginally attached, there were 1.1 million discouraged workers in January, up from 734,000 a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.5 million people marginally attached to the labor force had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities.

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The Structural Unemployment Problem

Former Labor Secretary Robert Reich offers some worrisome thoughts on his way to the jobs summit.

[H]ere's the real worry. The basic assumption that jobs will eventually return when the economy recovers is probably wrong. Some jobs will come back, of course. But the reality that no one wants to talk about is a structural change in the economy that's been going on for years but which the Great Recession has dramatically accelerated.

Under the pressure of this awful recession, many companies have found ways to cut their payrolls for good. They've discovered that new software and computer technologies have made workers in Asia and Latin America just about as productive as Americans, and that the Internet allows far more work to be efficiently outsourced abroad.

This means many Americans won't be rehired unless they're willing to settle for much lower wages and benefits. Today's official unemployment numbers hide the extent to which Americans are already on this path. Among those with jobs, a large and growing number have had to accept lower pay as a condition for keeping them. Or they've lost higher-paying jobs and are now in a new ones that pays less.

Yet reducing unemployment by cutting wages merely exchanges one problem for another. We'll get jobs back but have more people working for pay they consider inadequate, more working families at or near poverty, and widening inequality. The nation will also have a harder time restarting the economy because so many more Americans lack the money they need to buy all the goods and services the economy can produce.

So let's be clear: The goal isn't just more jobs. It's more jobs with good wages. Which means the fix isn't just temporary measures to accelerate a jobs recovery, but permanent new investments in the productivity of Americans.

Let's take the situation in Tennessee where the unemployment rate is now 10.5 percent for example. In the Volunteer state, manufacturing jobs have fallen 12.6 percent in the past two years. According to Tennessee Manufacturing Register, 56,647 jobs were lost due to closures and layoffs. A month ago, Manufacture's News Inc. (MNI), a Chicago based manufacturer's directory publisher, released a report on the industrial jobs in Tennessee. They found that a total of 15,110 jobs were lost between September 2007 and September 2008 but that serious bleed came over the past year. 41,537 jobs in Tennessee's manufacturing sector were lost between September 2008 and September 2009.

But while the loss has been accelerated over the past year, the loss has been actually been on-going for quite some time. According to the MNI report, Tennessee's 7,711 manufacturers now employ 403,030 workers compared to 547,494 workers in 2001. That represents a 26.4 percent decline amounting to 144,464 job losses.

Among the hardest sectors over the past 24 months are the furniture and fixtures sector down 20.8 percent; the transportation equipment sector down 20.6 percent; the rubber and plastics sector down 20.4 percent; the lumber and wood saw sector down 19.5 percent; the textile and apparel sector down 16.1 percent; the industrial machinery and equipment manufacturing sector down 13.6 percent; the fabricated material manufacturing sector down 12.6 percent; and the stone, clay and glass manufacturing sector down 9.6 percent.

Some of these sectors are just never going to regain their footing even when the economy recovers. Our textile and apparel has been in a slow and steady decline for 30 years.

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Christina Romer's Candor

I'll never quite understand why in the early days of the Obama Administration, the economic team was so insistent that the unemployment rate would not climb much above 8 percent when the economy was shedding jobs by the hundreds of thousands monthly. It is somewhat reassuring now, admittedly belated, that Christina Romer, the chair of the White House Council of Economic Advisers, is more candid about the bleak prospects for the US labor market. From the New York Times:

"Unemployment is likely to remain at its severely elevated level" through the end of next year, predicted Christina Romer, chairwoman of the White House Council of Economic Advisers, at a hearing of the Joint Economic Committee of Congress.

Ms. Romer said she agreed with private sector forecasters who expected that the economy would expand at a moderate pace through the end of next year as it slowly recovered from its deep recession.

But she cautioned that unemployment usually recovered much more slowly than economic growth, and that the job creation had to make up for a great deal of lost ground from the last two years.

And she warned that the rebound in jobs could actually be even slower than what White House officials and private forecasters had been predicting.

The US economy has lost 7.2 million jobs since the recession began 22 months ago. And while the official unemployment rate was 9.8 percent last month, the real unemployment rate, the U6, is much higher at 17 percent. The reality is that the US economy has been shedding jobs faster than the stimulus can grow new ones. An additional 263,000 jobs disappeared last month alone. The Obama Administration in the uncomfortable position of taking credit for an economy that's not as bad as it used to be but far from what it should be.

Ms. Romer notes correctly that the stimulus program put the brakes on a downward spiral in the economy, in effect preventing the economy from going off a cliff but there we remain hanging dangerously on the precipice. As Congressman Barney Frank of Massachusetts recently observed, academic economists can have a field day theorizing how the recession might have played out. But no politician ever got re-elected with a bumper sticker that said, "It Could Have Been Worse." We need a plan to make it better and soon.

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A Jobless Recovery

The nation's unemployment picture continue to darken in August suggesting that the economic recovery, such as it is, will be a jobless recovery. From the Bureau of Labor Statistics:

Nonfarm payroll employment continued to decline in August (-216,000), and the unemployment rate rose to 9.7 percent, the U.S. Bureau of Labor Statistics reported today. Although job losses continued in many of the major industry sectors in August, the declines have moderated in recent months.

Household Survey Data

In August, the number of unemployed persons increased by 466,000 to 14.9 million, and the unemployment rate rose by 0.3 percentage point to 9.7 percent. The rate had been little changed in June and July, after increasing 0.4 or 0.5 percentage point in each month from December 2008 through May. Since the recession began in December 2007, the number of unemployed persons has risen by 7.4 million, and the unemployment rate has grown by 4.8 percentage points.

Among the major worker groups, the unemployment rates for adult men(10.1 percent), whites (8.9 percent), and Hispanics (13.0 percent) rose in August. The jobless rates for adult women (7.6 percent), teenagers(25.5 percent), and blacks (15.1 percent) were little changed over the month. The unemployment rate for Asians was 7.5 percent, not seasonally adjusted.

The civilian labor force participation rate remained at 65.5 percent in August. The employment-population ratio, at 59.2 percent, edged down over the month and has declined by 3.5 percentage points since the recession began in December 2007.

In August, the number of persons working part time for economic reasons was little changed at 9.1 million. These individuals indicated that they were working part time because their hours had been cut back or because they were unable to find a full-time job. The number of such workers rose sharply in the fall and winter but has been little changed since March.

About 2.3 million persons were marginally attached to the labor force in August, reflecting an increase of 630,000 from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

Among the marginally attached, the number of discouraged workers in August (758,000) has nearly doubled over the past 12 months. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The other 1.5 million persons marginally attached to the labor force in August had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities.

As a technical matter, most economists believe that the United States is no longer in recession and that the economy is expanding. However that belies the reality that the recovery is likely to be weak, fragile and unsustainable with the danger of a double-dip recession increasingly probable. The economy is still losing jobs at about a 2.6 million annual rate and the unemployment rate is likely to surpass 10% before the end of the year.

If there is good news in this report, it is that the rate has slowed. Nonetheless, the overall conclusion is that the nation's labor market remains a somber one with little prospects of improvement.

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Diaries

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