Jobless recoveries

From the Bureau of labor Statistics:

(Click on the graph to see the whole thing.)

The recovery after the 2001 recession has been called the "Jobless Recovery," but job growth then was no worse than what we have seen after the 2007-9 recession.

Some employment statistics

The Bureau of Labor Statistics (BLS) released the July unemployment rate this morning. The headline was that the rate dropped from 9.2% to 9.1%.

Some digging into the data shows that since 1948, the oldest data BLS has, there have been 45 months in which the unemployment rate has been 9% or higher. One occurred in the first Nixon administration, 19 occurred during the first Reagan administration, and 25 (or 55% of the total) occurred during the 31 months of the Obama administration.

The Obama administration looks better if we look at months in which the unemployment rate was 8% or higher. Nixon/Ford had 12 months, Reagan had 27, and Obama 30.

Both Nixon and Reagan won second terms. At this point in the Nixon administration the unemployment rate was 8.6% and it fell to 7.6% in September of election year, which would have been the last data available before the election. For Reagan the numbers were 9.4% to 7.3%.

Looking at the unemployment rate, the current situation seems much like what happened in the 1980s, though perhaps not as severe. However, a difference between now and then is that in the last few years we have had a large drop in the labor force. People have stopped looking for jobs and no longer are counted as unemployed. Looking at the employment data rather than the unemployment rate shows that the current downturn was much more severe than the two downturns in the 1970s and 1980s.

Employment peaked in January 1974 and then declined by 3.37% over the next 17 months. It took another 14 months to surpass the January 1984 peak.

Employment peaked in February, 1980 and declined by 3.82% over the next 36 months. However, it took only ten months from there to surpass the February, 1980 peak.

In our most recent downturn, employment peaked in March of 2007 and declined by 7.42% over the next 32 months. Nineteen months later we still have not reached the previous employment peak--we have regained only 22% of the jobs lost. The current downturn is almost twice as severe as the very serious downturn in the early 1980s based on the employment data.

(All numbers based on data from the BLS website.)

Screening or human capital?

An article in the Lafayette Journal and Courier says that some employers do not want to hire people who have been unemployed for more than a year.

There is a stigma that long-term jobless people have been sitting around and don't really want to work. There is the perception that they won't take a lower-paying job -- and if they do, they will bolt as soon as they find a higher-paying one.
On top of that, some companies have explicitly barred the unemployed from certain job openings, outright telling them in job ads that they need not apply.

 ....
But the company is far from alone in wanting workers who already are gainfully employed, said Patrice Waidner, board chairwoman of the Indianapolis chapter of Business & Professional Exchange, a networking organization that helps unemployed professionals."Companies are saying, 'I will take the person who was just working or is currently working,' " she said. "It is extremely difficult to get back into the job market."

Does a person lose job skills as a result of being unemployed for a long time? Or does long-term unemployment tend to be a marker for people who are less reliable and dependable than average? The article does not tell us much, but then the reporter probably does recognize that these are interesting questions.

Uncertainty and investment

From the campaignspot blog at National Review, a letter from a reader

During the Q&A session, I felt compelled to ask the obvious question:  Did he believe that the healthcare reform and related tax proposals, the proposed cap and trade legislation and the consequent increase in energy costs, the expiration of the Bush tax cuts, the agitation for higher taxes on the wealthy, the proposal to increase corporate tax rates, the proposal  to increase capital gains taxes, the trial floating of ideas such as a national VAT and removal of the earnings cap on FICA, the more robust regulatory bureaucracy . . . did he believe any of these uncertainties were depressing hiring?

He stated yes, without a doubt and proceeded to relay a conversation he had with a local chemical company regarding their 2010 capital expenditure budget.  When asked what the company intended to invest in 2010, the response was ‘nothing,’ not due to a paucity of good opportunities, but because it was impossible for the company to calculate a rate of return given all the uncertainty over cost of labor, energy prices, regulatory mandates and the like.

:

Jobs lost

The latest unemployment data from the Department of Labor shows that the  U.S. economy continues to shed jobs. The graph below shows total employment.

The number of employed (total jobs) dropped by 589,000 from Nov to Dec. Most did not move to unemployed but dropped out of the labor force. In the past year, (December to December) 5,390,000 jobs have been lost--that is drop in the number of employed. However, there is some good news--the October unemployment rate was revised from 10.2% to 10.1%.

The labor force participation rate has dropped from 66.5% in December 2008 to 64.6% in December 2009. As people lost jobs, many left the labor force. If they had stayed in, being counted as unemployed, the unemployment rate would be 11.6%.

Since the high of 146,483,000 in November of 2007, the U.S. economy has lost 8,691.000 jobs and there is no reason to believe that we have hit bottom yet. That number dwarfs the slightly more than 2 million jobs lost in 1981-1983.

Previous post here.  Data are from here.

Young entrepreneurs

The Wall Street Journal reports an increase in college graduates becoming entrepreneurs because of the bad job market:

Of course, young entrepreneurs also are likely to face their own hurdles. "Having the skill set to become an entrepreneur is different than any thing you learn in school," says Susan Amat, the executive director of the Launch Pad at the University of Miami, an entrepreneurship-support program based out of the campus career center.
To that end, it's important for young entrepreneurs to seek the necessary help to get started. For current students or recent graduates, it might be easiest to reach out for assistance on campus. Many schools have campus incubators or offer start-up competitions, like Babson College's annual Entrepreneurship Forum, which offers cash, consulting, legal and Web services to winning business plans. Other schools have business incubators that help students—and sometimes outsiders—hone business ideas and, in some cases, support them financially or with other resources.

The minumum wage

A blog post at the Washington Post suggests that the recent increase in the minimum wage was a bad idea.

Back in 2007, Congress enacted a three-stage increase in the minimum wage from $5.15 to $7.25, the last installment of which took effect just last July. This was done with the best of intentions, of course. But what it meant in practical terms was that, at the height of a savage recession, the government essentially imposed a substantial tax increase on hiring. No wonder the unemployment rate among black teenage males is at an all-time high of 57 percent.
....
If Obama and Congress were really as serious as they say they are about reducing unemployment, they would at least be willing to discuss rolling back last July’s minimum wage increase. It would create some jobs for those who need them most, and it would not cost taxpayers a dime. Yes, those who get hired at a reduced minimum wage would have to work for less. But at least they'd be working.

The reaction of the commenters is interesting. The majority berate the idea with invective with comments like these:

Mr. Lane, I would suggest that you experience of joy and comfort of living on a minimum wage salary for a few months, and then write an article about it. People like you are what got our country where it is now economically. President Obama, with the grace of God, will heal your years of abuse.
....

I agree with the other posters. How can this guy even write this crap? Lower the minimum wage when it took so long to get it raised? Of all the suggestions on increasing jobs in this country, this has got to be the most stupid one yet.
The minimum wage was low and employers still weren't hiring and the employees had to get government help just to eat.
Easy for an idiot like this to make this claim when he doesn't have to feed a family on the minimum wage.

I wonder if they have any idea of how stupid they appear to those who actually know some economics.

Meanwhile, Tigerhawk is worried about the increase in costly regulations and its effect on hiring:

Already our economy is struggling against health care "reform," massive new regulation and/or taxation on any business that emits carbon, the proposed "Employee Free Choice Act," new regulation in financial services, new corporate "governance" requirements, fiscal catastrophes in all the large states controlled by the Democrats, and huge new tax increases for the people who actually decide to hire people (whether they are corporate tools or individual entrepreneurs). Do we really need "an array of 90 rules and regulations" from the Labor Department on top of all that?

Just when you think "they can't keep making it harder," they do.

I thought this comment especially interesting:

I just bailed out of a deal to buy a company which has gone from a money-making position to a money-losing position in the past two years and is in need of a turn-around. The services provided by this company are extremely carbon-intensive. There is just no way I can justify risking capital on a business like this in this regulatory environment.

There are no other buyers on deck. I suspect this business will be liquidated within 6 months. Another 150 jobs gone. Way to go, Obama.

This is what you get when nobody in the Administration has any private sector experience.

An unemployment feedback loop

From an AP article:

Employers already are squeezed by tight credit, rising health care costs, wary consumers and a higher minimum wage. Now, the surging jobless rate is imposing another cost. It's forcing higher state taxes on companies to pay for unemployment insurance claims.
Some employers say the extra costs make them less likely to hire. That could be a worrisome sign for the economic recovery, because small businesses create about 60 percent of new jobs. Other employers say they'll cut or freeze pay.

 More unemployment raises unemployment insurance costs for employers, making them less willing to hire, causing more unemployment--a positive-feedback loop or, in the terms popular in macroeconomics, an automatic destabilizer.

Another neat dynamic graph

Here is a graph showing job losses over the previous 12 months by standard metropolitan statistical areas. You can see the effects of Katrina, the on-going disaster that is Detroit, and at the end, the current recession.

Mark Perry on when unemployment will go down

Here. A look at the past suggests it will be more than a year after the end of the recession before we see the unemployment rate falling.

Changes in employment

The unemployment report for September was released on October 2, and what was notable in this one was the large number of people who withdrew from the labor force. Unemployment rose by 214,000, but the number of people in the labor force shrank by 571,000, which means that the number of people working shrank by 785,000. Graphs which show changes in the number of unemployed suggest that we are getting close to some good news. I wondered what the graph would look like if instead we looked at changes in the number of employed. Below is the graph.

The graph begins with the Jan-Feb 2006 change and ends with the Aug-Sept 2009 change. The data were found at http://data.bls.gov/cgi-bin/surveymost?bls. The series chosen was the series Civilian Employment (Seasonally Adjusted) - LNS12000000. In January of each year, data are affected by changes in population controls, so the Dec-Jan changes may be erratic.

This graph seems much less encouraging concerning the end of the recession than graphs showing changes in unemployment. Below are the month-to-month changes in employment used to construct the graph.


Jan-Feb 2006 . . . 295
Feb-Mar 2006 . . . 289
Mar-Apr 2006 . . . 50
Apr-May 2006 . . . 329
May-Jun 2006 . . . 266
Jun-Jul 2006 . . . -111
Jul-Aug 2006 . . . 397
Aug-Sep 2006 . . . 162
Sep-Oct 2006 . . . 483
Oct-Nov 2006 . . . 298
Nov-Dec 2006 . . . 402
Dec-Jan 2006/7 . . . -6
Jan-Feb 2007 . . . 9
Feb-Mar 2007 . . . 275
Mar-Apr 2007 . . . -620
Apr-May 2007 . . . 268
May-Jun 2007 . . . 142
Jun-Jul 2007 . . . -85
Jul-Aug 2007 . . . -240
Aug-Sep 2007 . . . 471
Sep-Oct 2007 . . . -336
Oct-Nov 2007 . . . 798
Nov-Dec 2007 . . . -371
Dec-Jan 2007/8 . . . 23
Jan-Feb 2008 . . . -242
Feb-Mar 2008 . . . -52
Mar-Apr 2008 . . . 234
Apr-May 2008 . . . -283
May-Jun 2008 . . . -236
Jun-Jul 2008 . . . -142
Jul-Aug 2008 . . . -323
Aug-Sep 2008 . . . -244
Sep-Oct 2008 . . . -372
Oct-Nov 2008 . . . -513
Nov-Dec 2008 . . . -806
Dec-Jan 2008/9 . . . -1239
Jan-Feb 2009 . . . -351
Feb-Mar 2009 . . . -861
Mar-Apr 2009 . . . 120
Apr-May 2009 . . . -437
May-Jun 2009 . . . -374
Jun-Jul 2009 . . . -155
Jul-Aug 2009 . . . -392
Aug-Sep 2009 . . . -785


Update: Below is a graph showing total employment from January 2006 until September 2009.
In November of 2007 the number employed was 146,665,000. In September, 2009 the number employed was 138,864,000. Employment has dropped by 7,801,000 in that time. A couple of interesting sub-periods: since November 2008 employment has dropped by 5,280,000 and since January 2009 it has dropped by 3,235,000.

Drop in employment = jobs lost.

Update here.

Discouraged workers

The New York Times has an article on discouraged workers, those who want to work but are not actively working because they do not think there are any jobs they can get. The article tells why several individuals are in the situation that they are in.

Unemployment rate

The unemployment rate for August is 9.7%, a new high for this recession as the economy continues to lose jobs. (Current report is at http://www.bls.gov/news.release/pdf/empsit.pdf, which is not a permanent link.) Alternative measures of unemployment can be found at http://www.bls.gov/news.release/empsit.t12.htm. These measures attempt to add in the effects of discouraged workers and people who are working part time but would like to be working full time. The highest, U-6, which includes both of these groups, is 16.8%.

Update: The teenage unemployment rate rose by 1.7% from the previous month to 25.5% and now is at an all-time high. The rise is consistent with the hypothesis that a rise in the minimum wage will result in job loses for those who have the least skill.

Update: The alterntive measures of unemployment are now at http://www.bls.gov/news.release/empsit.t15.htm

Is unemployment understated?

Mort Zuckerman in The Wall Street Journal says, "Yes," and gives ten reasons. Among them:

- More companies are asking employees to take unpaid leave. These people don't count on the unemployment roll.

- No fewer than 1.4 million people wanted or were available for work in the last 12 months but were not counted. Why? Because they hadn't searched for work in the four weeks preceding the survey.

....
- The average work week for rank-and-file employees in the private sector, roughly 80% of the work force, slipped to 33 hours. That's 48 minutes a week less than before the recession began, the lowest level since the government began tracking such data 45 years ago.
....
- The average length of official unemployment increased to 24.5 weeks, the longest since government began tracking this data in 1948. The number of long-term unemployed (i.e., for 27 weeks or more) has now jumped to 4.4 million, an all-time high.

It's tough being a teen

From Forbes, noting that the teenage unemployment rate is 24%, the worst since 1965. Clearly the recession is a big part of that, but also,

Lopez Eastlick says there is another major factor: rising minimum wage requirements. Minimum wage increases raise the bar for entry-level employment. From 1997 until 2007, the minimum wage stood at $5.15. Congress raised it to $5.85 in 2007, to $6.55 last year, and in July it is scheduled to increase again to $7.25.
....
"For teens who are not in the work force, as many as 10 years later there are financial impacts to that. Ten years later, if you were not employed, you're lagging behind your peers," says Lopez Eastlick. "There's an invisible curriculum you learn from having a job."

(For more bad news for young people in today's job market, see the last link here.)

Update: From the New York Times, "Say Hello to Underachieving":

If the only problem were tedium, students might find a recessionary summer unpleasant but endurable. But some expressed concern that the economic gloom might be a preview of harsh career realities that await.

“The worst thing about this summer is the lack of hope felt by so many kids,” Lydia Wiledon, a Barnard undergraduate, wrote in an e-mail message. “College students ready to thrust themselves into work find nothing, and those most in need are edged out by older, more skilled individuals who are overqualified for such foot-in-the-door opportunities. I worry about how this employment drought will affect my generation in the future.”

Lack of hope? Didn't we just elect Hope? The problem with the unwanted leisure?

Students who enter the job market during a recession can see their wages lag behind comparable students who graduated in better times for as long as 15 years, according to a recent study by Lisa B. Kahn, an economist at the Yale School of Management.

A month ago Iowahawk outdid himself with his post on "funemployment":

As frivolous as it sounds, funemployment is a statement about American society. Experts say it's a sign that Americans are slowly embracing a healthier lifestyle that centers on self-actualization, survival, and Twitter rather than the often soul-crushing burdens of corporate careerism. These experts frequently credit the Obama Administration.

"Recession is a great opportuning for people to get outside, enjoy a sunny park bench, and have fun," said Robert Lester, a professor at UCLA's Anderson School of Business. "And President Obama is making that kind of fun possible for more and more people every day."

Read the whole thing if you need a laugh.