Demographics of Joblessness
Men vs. Women
This recession has hit men harder than it has hit women. However, over the past year, things seem to be “evening out” between the genders. This month the news was good for almost all demographic groups.
In January, the unemployment rate for adult men (over 20) fell to 8.8% from 9.4% in December and from 9.9% November. It is down from 10.0% a year ago. A bit of the decline is an illusion though as the participation rate for men fell from 74.0% a year ago to 73.2% in January, and down from 73.6% in December. The employment rate for men did rise to 66.8% from 66.7% in December is up from 66.5% a year ago.
Thus, the employment situation for adult men has improved relative to both last month and a year ago, but not by as much as the drop in the unemployment rate would suggest. Still, even when factoring in the change in the participation rate, a decline from 9.9% to 8.8% over two months is impressive.
For women, the unemployment rate fell to 7.9% in January, down from 8.1% in December, but up from 7.8% a year ago. The participation rate was 60.0%, down from 60.1% in December, and the employment rate rose to 55.3% from 55.2%. A year ago they were at 60.6% and 55.8%, respectively. Again, some real progress, but not as much as the change in the unemployment rate alone would suggest.
In the overall big picture, men have fared far worse than women in this downturn. There are two possible reasons for that. The first is that the industries that have been particularly hard-hit in this downturn tend to be far more male-dominated than the industries that have skated though this recession more or less unscathed. The most glaring example of this would be the construction industry versus the health care industry (more on the industry breakdowns below).
The second explanation is that on average, women tend to still be paid far less than men do, and employers might be more prone to let their relatively high priced male employees go first before their cheaper female employees. The industry effect is probably the bigger one, but the two are not mutually exclusive and both might be playing a role.
Teenage Demographic
Teens, regardless of gender have had a very hard time of it in this recession. Just go to a McDonalds (MCD) and you will see this for yourself. Normally the blemishes you see on the cashiers face is acne, not wrinkles and age spots as is the case now. In January, the teen unemployment rate rose to 25.7% from 24.4% in December but it is down from 26.2% a year ago.
The deterioration from last month is not as bad it appears, but the improvement from last year is a bit of an illusion. The participation rate, rose to 34.6% from 34.3% in December, but was 35.3% a year ago. The percentage of teens that actually have a job was just 25.7%, up from 25.6% in November but down from 20% a year ago.
While for the most part the earnings from teen jobs tend to go towards clothes from Abercrombie & Fitch (ANF) and other teen clothing stores, for many it is a significant part of paying for college. Also, when teens work, they learn important job skills such as the importance of actually showing up, and doing so on time. The extremely low levels of teens working is not a good sign for the future.
Breakdown by Race
Not surprisingly, Whites have a lower unemployment rate that do Blacks or Hispanics. But this month all ethnic groups saw the unemployment rate fall. The rate for Whites fell to 8.0% from 8.5% in December and from 8.9% in November, and down from 8.7% a year ago. The participation rate, though, fell to 64.5% from 64.7% last month and 65.2% last year. The employment rate for Whites rose to 59.3% from 59.2% in December and was down from the year-ago level of 59.5%.
The unemployment rate for Blacks fell to 15.7% from 15.8% in December, and 16.4% a year ago. The change in the headline unemployment numbers for the month are a bit exaggerated due to changes in the participation rate. For the month, the participation rate for Blacks fell to 61.7% from 62.1% in December, and down from 62.3% a year ago.
The employment rate for Blacks fell to 52.0% from 52.3% in December, but matched the year-ago level. The unemployment rate is 96.3% higher than for whites, and the employment rate is 12.3% lower (52.0% vs. 59.3%). The participation rate is just 4.3% lower. A year ago the participation rate was 4.4% lower and the employment rate was 12.6% lower.
For Hispanics, the unemployment rate in January fell to 11.9% from 13.0% in December and down from 12.5% last year. The monthly improvement was not an illusion, as the participation rate rose to 67.1% from 66.9% in December. The yearly improvement, though, is much more of an illusion, as a year ago the participation rate for Hispanics was 68.0%.
The employment rate jumped to 59.1% from 58.2% in December. A year ago the Hispanic employment rate was 59.4%.
Stay in School
The unemployment rate for high school dropouts fell to 14.2% in January from 15.3% in December from 15.7% in November. It is down from 15.1% a year ago. Again, the monthly improvement is mostly an illusion, but relative to a year ago the situation is more real.
The participation rate among dropouts fell to 45.1% from 46.0% in December and is down from 45.5% a year ago. The percentage of high school dropouts actually employed fell to 38.7% from 39.0% December but is unchanged from a year ago. I should note here that the numbers by level of education refer to people over age 24, and so are not directly comparable to some of the other numbers. The total unemployment rate for people over age 24 was 7.6% in January, down from 8.1% in December and 8.2% a year ago.
Just finishing high school or getting your GED substantially increases your odds of having a job. The unemployment rate for high school grads (with no college) fell to 9.4% from 9.8% in December and is down from the 10.1% rate a year ago. In all three months, the level was far below that for drop outs.
This month, the unemployment rate for dropouts was 51.1% higher than for those who at least finished high school. However, the participation rate fell to 60.3% from 60.9% in December. A year ago it was at 61.2%, so the improvement is an illusion. The employment rate for high school grads also fell on the month to 54.6% from 54.9% in December and 55.0% a year ago.
Those who went to college but did not finish, or only got an Associates Degree, had an unemployment rate of 8.0%, down from 8.1% in December, and down from 8.5% a year ago. Unlike for those who never went to college, here the improvement looks real. The participation rate for Associate Degree holders was unchanged at 70.2% but is down from 71.4% a year ago. The employment rate rose to 64.6% from 64.5% in December but is below the 65.4% level of a year ago.
For those who stay in school to get their BA (or higher) the unemployment rate plunged to 4.2% from 4.8% in November, and is down from 4.9% a year ago. The monthly improvement is not quite as good as it looks because the participation rate fell to 76.4% from 76.9% in December and is below the 77.0% level of a year ago. The percentage of college grads with jobs remained at the December level of 73.2% and is one tick below the 73.3% level of a year ago.
The overall unemployment rate for all people regardless of education over 24 years old was 7.6% in January, down from 8.1% in December and down from 8.2% a year ago. The unemployment rate for people 20-24, those who are just entering the full time workforce was 15.2%, down from 15.3% in December, and down from 15.7% a year ago.
If these people cannot get jobs, they tend to remain living with Mom and Dad. This slows the rate of household formation, and hence the demand for housing. That makes it difficult for the economy to absorb the huge housing inventory overhang.
Normally housing is the locomotive that pulls the economy out of recessions. That locomotive is still derailed, and it is the principal reason that this recovery has been so sluggish. The improvement in the unemployment rate for these folks is good news, but the level is still extremely problematic.
The unemployment rate for those a bit older, the 25 to 34 year old cohort, which is the prime age for first-time home ownership, is a bit lower but still higher than the average plunged to 9.3%, down from 10.1% last month and 9.9% a year ago. Lowering the unemployment rate amongst these people will be key to resolving the housing problem. Unfortunately, the participation rates and employment rates are not provided for the different age cohorts. Thus it is hard to tell how much of the improvement (particularly the 25-34 group) is real and how much is an illusion.
Where the Jobs Are (and Are Not)
The private sector actually added more than the total number of jobs this month. State and local governments laid off 12,000 workers, and have trimmed their payrolls by 237,000 over the last year. Actually it is all at the local government level where the declines are occurring, as the number of state employees was unchanged over the last year.
In looking at the effectiveness of the stimulus program from the Federal government, one should keep in mind the massive anti stimulus effect of budget cuts and tax increases (mostly budget cuts) at the state and local levels of government. The federal government dropped 2,000 jobs in the last month and 16,000 over the past year.
The private sector added 50,000 jobs, a big slowdown from an addition of 139,000 jobs in December, and below the 128,000 added in October. While the January increase was not as big as expected, there were substantial upward revisions to the previous two months.
December was revised up from a gain of 113,000 and November was revised up from 79,000. A year ago, the private sector dropped 42,000 jobs in January. The total increase of 1.237 million over the last year, in a normal year, that would be a solid showing, but we lost over 8 million jobs in the great recession, so we still have our work cut out for us.
Within the private sector, the goods producing sector gained 18,000 jobs. The construction industry lost 32,000 jobs, on top of a loss of 7,000 in December.
The construction industry has been particularly hard hit in this downturn, accounting for about 25% of all the jobs lost, even though at the start of the recession it accounted for less than 6% of the total jobs in the country. As these jobs generally do not require a lot of formal education, the demolition of construction helps explain why the unemployment situation is so dire for those who never went to college.
As a male-dominated industry, it also helps explain why this recession has been so much tougher on men than it has been on women. Employment in Construction peaked before the rest of the economy, in April 2006. Since then, we have lost 2.271 million construction jobs. Most of the decline, though, happened after the overall private sector jobs peaked in December 2007, and since then Construction jobs are down by 2.032 million, or 27.1%.
Since the peak, overall private sector employment is down by 6.576 million. In other words, this one industry is directly responsible for 30.9% of all job losses since the end of 2007. For the month though, this might be one area where the weather played a big role.
Manufacturing Jobs Increase
Manufacturing gained 49,000 jobs, up from a gain of 14,000 in December. Manufacturing employment has been in a secular decline for about 30 years, but it has actually fared pretty well over the last year or so.
The peak in manufacturing jobs was way back in July of 1979 at 19.531 million. By the time the Great Recession started in December 2007, the number of manufacturing jobs was already down to 13.740 million. The low in manufacturing jobs was in December 2009 at 11.456 million, and since then we have gained back 161,000 of those jobs. Still, relative to the start of the Great Recession manufacturing jobs are down by 2.123 million, representing 32.3% of all job losses from the peak.
Service Sector Results
The Service sector gained just 32,000 jobs in the month, down from an increase of 146,000 in December (revised from a gain of 115,000) and from a gain of 120,000 in November (revised from 84,000). A year ago the Service sector gained 6,000 jobs.
Relative to a year ago, private service sector jobs are up by 849,000, but are still off by 3.555 million from the start of the Great Recession. One of the biggest contributors to Service sector jobs, as always, was the health care industry, which added 12,900 jobs.
The health care industry has not had a single down month in terms of employment in the entire downturn. The health care industry has a far higher proportion of women working in it than does the economy as a whole, and this is a big part of the reason that the unemployment rate for women is so much lower than that for men.
Temp Workers
Of particular interest is the change in temporary workers. Those jobs fell by 11,400 in January, partially reversing a on top of 38,100 gain in December.
It is not that being a temp is the greatest or highest paying job in the world that makes them of particular interest it is because they are a good leading indicator of future employment trends. This is the first decline in temporary employment since August 2009, and is thus a bit worrisome.
When during a downturn an employer first sees a pick-up in demand, he will not know if it is just a temporary blip, or the start of a real recovery. Thus he is going to be hesitant to take the time and expense of bringing on new workers who will just have to be laid off it if does turn out to be just a blip.
The first thing he is going to do is work the existing workforce harder. This is particularly is hours have been previously cut back due to slow demand. The upward trend in the average workweek is a very good sign in that regard, in addition to the fact that working more hours means more income, and thus more spending by hourly employees.
The second thing an employer will do when faced with an increase in demand is to call a temp agency. Only when the employer is reasonably sure that the upturn is for real and will last will he figure that it is worth bringing on a full-time permanent employee. However, with the exception of July, temp jobs have been rising every month since August 2009, and one would think that we would be starting to see those translating into permanent jobs at a faster rate at this point.
That disconnect could be pointing to some sort of structural shift in the employment market, but it is too early to say. Since 8/09 the number of Temps is up by 445,400 or 25.5%, but is still 14.1% below the level at the start of the Great Recession.
Lots of Crosscurrents
Overall, I would have to rate this report as mixed, if not downright strange. The number of jobs added was well below the expected levels, even well below the levels that were expected prior to the ADP report on Wednesday.
ADP has missed badly for three months in a row now, and overestimated each time. On the other hand, there were substantial upwards revisions to the job totals for both November and December. The December report was also a big disappointment in terms of the overall job adds for the month, but it, too, saw significant upwards revisions to prior months. Ditto of November. That leads me to suspect that the January job totals are likely to be revised up when we get the February report.
The drop in the unemployment rate makes for a nice headline, but there was somewhat less to it than really meets the eye once the underlying participation rate and employment rates are examined. That is not to say the drop in the unemployment rate was false, just overstated.
Underemployment Rate
If we include discouraged workers as well as the involuntary part-timers, the underemployment rate (U-6) also fell to 16.1% from 16.7% in December and is down from 16.5% a year ago. That is good news, at least in terms of the direction; the level is still just plain awful. Those who are working part time for economic reasons even though they want a full-time job plunged by 524,000 on the month, but is 40,000 higher than a year ago. This still indicates a huge amount of economic slack over and above the number of people that are actually unemployed, but that some of that slack is slowly being absorbed.
The pace of job creation we are seeing is not going to be enough to put a dent in the huge numbers of people who are without work and want it. Particularly based on the establishment survey figures. The household survey numbers are much more optimistic, pointing to a gain of 117,000 jobs in January on top of a gain of 297,000 jobs in December.
Yes, the pace of job creation in this recovery is much better than it was coming out of the last two recessions, but that is pretty cold comfort for those who are being forced into abject poverty because they can’t find work despite months and months of pounding the pavement (or the keyboard, as is more likely these days).
Officially, we are now 19 months into an economic recovery, and the economy has added a total of just 94,000 private sector jobs since then. At the same point after the 2001 recession was over, the economy had actually lost an additional 1.342 million jobs, and after the 1990-91 downturn, 19 months into the recovery the economy had added a total of just 11,000 jobs.
Thus this slow recovery in jobs is not all that unusual on a historical basis. Most of those people are really not going to be all that interested in how the pace of this recovery compares to the pace of the recovery following the 1991 downturn, they just want a job that can support their family. However, the point is that it is not unusual for the pace of job creation to be slow even after the recession has been over for awhile. The damage done by this downturn was far deeper and more extensive than in those downturns.
The final graph below, also from () shows just how deep and nasty this downturn was relative to all the post war recessions that came before it. By this long after the previous peak in employment, in every case but one, (2001) the economy had fully recovered and had more total jobs than when the recession started.
While clearly we have started the upturn, it is going to take a very long time before we surpass the total number of jobs the economy had back in December of 2007. At the January pace, it would take 151 more months from here, that’s almost 13 years to get back to the 12/2007 peak in private sector employment. Even if we could go back to the awesome job creation pace of the late 1990’s (apx. 250,000 per month) it would be 2013 before we got back to pre-Great Recession levels of employment.
The fiscal stimulus, as helpful as it has been in preventing a much deeper downturn and giving us the start of a recovery, is starting to wear off. Unfortunately there seems to be no appetite in Congress for renewing it. We will not get much progress on the deficit, either, as the spending cuts will more than be offset by a continuation of the Bush tax cuts for everyone, not just the lower 98%. That “stimulus” going to the top 2% is not likely to be very effective in creating many jobs.
The stimulus spending at the Federal level was substantially offset by anti-stimulus for the state and local levels. That anti-stimulus is continuing. Recently, the biggest single infrastructure project in the country a desperately needed second railroad tunnel under the Hudson River was cancelled because the Governor of New Jersey did not want to put up one third of the cost. That project would have created thousands of new jobs, and jobs that would go to the very hard hit construction industry. It would have had a very high social return on investment by easing traffic congestion going into New York City and made life easier for all the New Jersey residents who commute into the city.
While it is true that you don’t want to raise taxes in a recession or in an incipient recovery, it is equally true that you don’t want to cut government spending. Tax increases and spending cuts are both forms of fiscal contraction. Not all tax cuts or spending are equal in terms of stimulating the economy and creating jobs.
The cut in the payroll tax is likely to be quite effective in stimulating the economy since it will result in higher take home pay to people who are likely to spend it quickly. Cuts in spending on overseas adventures in Iraq and Afghanistan would not do much damage to domestic employment but the spending there is not primarily about domestic employment. Cuts in social safety net spending, which is apparently high on the agenda of those pushing to cut spending right away is likely to be a major drag on the economy and job creation.