March 2009 Unemployment report came out. At first glance, it appears slightly worse than analysts expected: 8.5% and 663,000 jobs lost. At second look, it’s actually worse. First, from Calculated Risk: Employment Report: 663K Jobs Lost, 8.5% Unemployment Rate
From the BLS:
Nonfarm payroll employment continued to decline sharply in March (-663,000), and the unemployment rate rose from 8.1 to 8.5 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Since the recession began in December 2007, 5.1 million jobs have been lost, with almost two-thirds (3.3 million) of the decrease occurring in the last 5 months. In March, job losses were large and widespread across the major industry sectors.
Graphs & Three reasons why it’s worse than it sounds:
First, the headline unemployment number is actually calculated using a data series called U3. Because of the way “unemployment” is defined by the BLS, people who are “underworking”, meaning they are working reduced hours when they want full-time, are not counted in U3. In this recession, we are nearing a record level of such people relative to the workforce (we’re at record level in numbers, just not quite in % yet). Again from CR:
From the BLS report:
In March, the number of persons working part time for economic reasons (some-times referred to as involuntary part-time workers) climbed by 423,000 to 9.0 million.
Part Time Workers Click on graph for larger image in new window.
Not only has the unemployment rate risen sharply to 8.5%, but the number of workers only able to find part time jobs (or have had their hours cut for economic reasons) is now at a record 9.0 million.
Of course the U.S. population is significantly larger today (about 305 million) than in the early ’80s (about 228 million) when the number of part time workers almost reached 7 million. That is the equivalent of about 9.3 million today, so population adjusted this isn’t quite a record – yet – but it is getting close.
And the rapid increase is stunning …
A second reason why it worse is because in this recession, we are setting records for how wide-spread the problem is. The unemployment increases have been seen in all 50 states and in nearly all industries, including service industries. This is different from the recessions in the 1940-1970’s. In those recessions, unemployment was primarily concentrated in manufacturing. It was the stereotypical situation of factories needing to cut-back, laying-off workers, and then calling those same workers back to the same jobs 9-15 months later. Those recessions were deep and concentrated with a quick bounce-back. Graphically, as shown in this graph (hat tip CR), they were V-shaped.
In contrast, recent recessions of 1990’s-2001, were shallow U-shaped affairs. What happened in these recessions was that when the economy slowed, whole businesses or plants were closed and/or shipped overseas. The result was that workers weren’t really “laid-off”. Instead, they lost their jobs permanently. Fortunately, those recessions were relatively mild and concentrated in a few industries and some states.
Now it looks like we’re headed for the worst of both worlds: a deep recession like the older ones, but also a long job recession with little call-back or bounce-back. Workers who are laid-off need new skills and new occupations. Wish it weren’t so, but it is.
A third reason why it’s worse: The unemployment report for recent months has consistently included revisions to prior month’s losses that are unusually large. For example, the January estimate of jobs lost when first announced on Feb 6 was 598,000. On March 6 that estimate for January was revised upward. Now, April 3, it was again revised upward to 741,000.
all graphs courtesy of Calculated Risk.