It seems as if the recession has pushed more Americans into part-time work and has discouraged others from even seeking work. Unemployed Americans are so discouraged about the prospect of finding a new job that they're checking out of the labor force at the highest and fastest rate in nearly 10 years. Further, the recession has forced more full-time workers into part-time slots than at any time over the past 15 years. Those are the sobering conclusions drawn from some data analysis that were did by the Washington Post and are seen in the most recent unemployment report that showed August joblessness actually ticked up a little.
Despite this small reduction in the unemployment rate, the data shows that things are no better for Americans who want full-time jobs but can't find them. For this analysis, one only has to compare two unemployment rates over the past several years: the official rate and the unofficial rate, which Washington Post at The Ticker writes about every month.
The resulting chart shows the gap between these two rates and has widened to its highest level since 1994 during the current recession:
First, a word on the difference between the two rates:
-- The official rate -- which dropped to 9.4 percent in July from 9.5 percent in June -- is determined by a rotating monthly survey of 60,000 U.S. households performed by the Labor Department's Bureau of Labor Statistics, combined with jobs data sent in by employers. According to this measure, you are marked as "unemployed" if you're jobless and you meet certain criteria, including whether you looked for work in the previous four weeks.
-- The unofficial rate starts with the official rate and then adds in everyone else who should be working full-time but is not, including those whose hours have been reduced from full-time to part-time, those who have become so discouraged they have given up looking for work and others who are "marginally attached to the labor force." Many economists believe this rate is a truer measure of the health of the economy. In July, the rate dipped to 16.3 percent from its historic high (since 1994) of 16.5 percent in June.
Notice that the chart only goes back to 1994, so it covers only the two most recent recessions. I wanted to go back to 1970, which would have covered seven recessions, but the BLS changed the way it counts the unofficially unemployed in 1994, so that's as far back as I could go with a strict, apples-to-apples comparison.
Based on that, here's what the chart shows: The gap between the officially and unofficially employed in 2000 -- just before the recession caused by the dot-com crash and 9/11 -- was at its smallest. This means that if you were unemployed at this time, you were the most encouraged you'd been since 1994 that you'd find a new job.
That gap peaked in March of this year, and has backed off just a little since then. This means that more people who are unemployed now have checked out of the labor force and just given up looking for work. It also means that more full-time employees have been reduced to part-time workers, as we will see in a moment. Official unemployment has risen swiftly from the beginning of the recession in December 2007 to now: From 4.9 percent to 9.4 percent in July.
But the rise in unofficial unemployment has been jaw-dropping: From 8.7 percent in December 2007 to 16.3 percent in July. The rate has nearly doubled and the gap between the two measures has increased more swiftly than it did during the previous recession.
The main reason I wanted this chart to go back farther was to capture the 1982-83 recession, when the official unemployment rate shot up to nearly 11 percent, the highest in nearly 40 years. So this chart is startling, to be sure. But what does it mean?
Harvard economist Lawrence Katz, a former chief economist at the Labor Department, was pinged to get his take on the data. His takeaway: This recession has been so bad, that even after businesses have laid off workers, they've been forced to reduce many of their remaining employees from full-time to part-time status. That's what happens when you have to cut to the bone. And then keep cutting.
"Workers on short hours (the underemployed or the involuntary part-time) account for 5.6 percentage points of the 6.9 percentage point gap between the unofficial and official unemployment rate measure," he wrote us by e-mail, "while those who have dropped out (discouraged and other marginally attached workers) account for only 1.3 percentage points in the gap."
While it may be "only 1.3 percentage points," that still translates to 796,000 people, an increase of 335,000 from last year. That's a lot of people checking out of the labor force. This number "is larger than the 2001 recession," Katz writes, "but we don't have comparable data for the 1982-83 recession since BLS tightened up on the definition of what is a discouraged worker" in 1994.
He did add, however, that if you look at the unofficial data from the 1982-83 recession (not an apples-to-apples comparison) it indicates that there were "much larger levels and increases" in discouraged workers in that recession than in this one. So, at least we've got that going for us. As you may remember, unemployment benefits were extended earlier this year as part of the $787 billion stimulus bill. We wondered if this would disincentivize the jobless from looking for work because the unemployment checks keep rolling in.
But Katz says just the opposite is true. "The increase in the length of unemployment benefits actually leads more people to continue to call themselves unemployed [as opposed to "discouraged"] and to stay connected to the labor force and searching for jobs," Katz writes. The unemployment benefit "extensions seem to be succeeding in keeping the unemployed attached to the labor force and not dropping out and going onto, say, disability programs."
Even if the recession ends in this quarter -- meaning positive growth in GDP -- unemployment is likely to continue to climb to at least 10 percent, economists and the White House say. Unemployment has continued to rise for several months after six of the past seven recessions. That's just what it does as a lagging indicator.
What we'll be watching for, however, is whether the gap between the officially and unofficially unemployed continues to grow. If it does, this recovery will take even longer than people think.
Thus, this month’s actual unemployment rate hit an all-time high of 16.8% for the month of August. I am like the Washington Post Ticker in the sense that I like to hammer on the official U.S. unemployment rate versus the unofficial rate, which we believe to be a truer picture of joblessness in this country.
The Labor Department said the official number climbed from 9.4 percent in July to 9.7 percent in August. But the unofficial number jumped from 16.3 percent to 16.8 percent. The difference between the two rates is due to who's counted among the unemployed.
The official number is arrived at by combining a rotating monthly survey of 60,000 U.S. households performed by the Labor Department's Bureau of Labor Statistics with jobs data sent in by employers. According to this measure, you are marked as "unemployed" if you're jobless and you meet certain criteria, including whether you looked for work in the previous four weeks.
The unofficial number starts with the official rate and then adds in everyone else who should be working full time but is not, including those whose hours have been reduced from full time to part time, those who have become so discouraged they have given up looking for work and others who are "marginally attached to the labor force." Many economists believe this rate is a truer measure of the health of the economy.
Last month, we did some numbers-crunching and found that unemployed Americans are so discouraged about the prospect of finding a new job that they're checking out of the labor force at the highest and fastest rate in nearly 10 years. Further, the recession has forced more full-time workers into part-time slots than at any time over the past 15 years.
Now we know that unemployment has continued to rise for several months after past U.S. recessions have ended. Many economists and even the White House have said (hoped?) that the official number will top out around 10 percent. But even if that's the case, you should not expect it to suddenly start dropping back down as soon as it peaks. Good guesses say it could be a matter of years before the official unemployment rate gets back down to a figure we're more used to seeing, something in the 5 percent range.
As for the unofficially employed -- now numbering nearly twice the officially unemployed -- the wait could be longer. Thus, their needs to perhaps a stimulus for the jobless and it might be a good time to redirect $ $400 billion to business tax cuts.
The recession may be over on Wall Street and Silicon Valley, but on Working Family Avenue it still has a ways to run. That's the lesson of yesterday's August jobs report that showed losses of 216,000, which believe it or not is the slowest monthly decline in a year and caused the White House to praise with the faint damn that the "trajectory is in the right direction." That's the good news.
On the other hand, the jobless rate popped up to 9.7%, the highest rate in 26 years, from 9.4%, reflecting an increase in the size of the labor force. The main concern we see going forward is the slow pace of new job creation to soak up the 7.4 million workers who have lost jobs since 2007.
There are now 26 million Americans who can't find a full-time job. Average weekly hours remained at an abysmally low 33.1—which is putting a strain on family budgets. And the jobless rate including so-called discouraged workers, or those who have stopped looking, leapt to 16.8% from 16.3% in July. Meanwhile, the number of Americans working part-time who want full-time work increased by 278,000 to 9.1 million, which as a share of the workforce is larger than at any time since the recession of 1982. These are the workers that employers will tend to hire first as a recovery unfolds, so it is worrisome that this cohort remains so large.
None of this does much for the credibility of the Obama Administration's stimulus spending plan, which was sold with the promise of a jobless rate this year of "below 8%" if the stimulus were passed. That was off by some three million jobs in a mere seven months. The same economists who fretted in February that $780 billion in stimulus was too small now claim that the $300 billion or so that has been spent has somehow ignited the recovery.
But a tax-cutting stimulus would have provided much more job and economic growth for the buck, and it could even now too. If the Administration really wants to fire up private job creation, how about taking the remaining $400 billion or more and using it to lower business taxes? The unspent stimulus is enough for a two-year down payment on repealing the U.S. corporate income tax, which studies show is a job and wage-increase killer.
Congress could also reconsider its July minimum-wage increase of 70 cents an hour, which almost certainly contributed to the leap in teenage unemployment to 25.5% in August. The rate was 24% in June and 23.8% in July, before the wage hike started to price low-skilled teens looking for jobs out of the workplace. Congress would be wise to suspend the increase until the overall jobless rate falls below 7%.
Of course neither of our proposals is going to happen given the current policy views in Washington, but someone has to speak up for workers who want a job, as opposed to those lucky enough to still have them.
I still believe an economic recovery is under way, and some job growth will certainly follow. But the danger is that the U.S. will recover with only European levels of job creation. The French and Germans have had a hard time bringing down unemployment even during expansions, thanks to the burden of high taxes, regulation and onerous union work rules. The economic agenda now pending on Capitol Hill includes all three of these burdens, so it's no wonder that employers are being super cautious before they add to their payrolls.
The U.S. economy is a remarkably resilient animal, and even deep recessions have always been followed by recoveries, usually strong ones. But businesses aren't going to rehire nearly as many workers amid the current policy uncertainty. Therefore with the unemployment rate being the highest since 1983, it is clear that the jobless really need an economic stimulus now more than ever before the official unemployment hits 10% or above and the unofficial unemployment hits 20% or above. So Main Street is continuing to suffer as Wall Street seems to have recovered so who really got an economic stimulus from Washington that is the real question.
Despite this small reduction in the unemployment rate, the data shows that things are no better for Americans who want full-time jobs but can't find them. For this analysis, one only has to compare two unemployment rates over the past several years: the official rate and the unofficial rate, which Washington Post at The Ticker writes about every month.
The resulting chart shows the gap between these two rates and has widened to its highest level since 1994 during the current recession:
First, a word on the difference between the two rates:
-- The official rate -- which dropped to 9.4 percent in July from 9.5 percent in June -- is determined by a rotating monthly survey of 60,000 U.S. households performed by the Labor Department's Bureau of Labor Statistics, combined with jobs data sent in by employers. According to this measure, you are marked as "unemployed" if you're jobless and you meet certain criteria, including whether you looked for work in the previous four weeks.
-- The unofficial rate starts with the official rate and then adds in everyone else who should be working full-time but is not, including those whose hours have been reduced from full-time to part-time, those who have become so discouraged they have given up looking for work and others who are "marginally attached to the labor force." Many economists believe this rate is a truer measure of the health of the economy. In July, the rate dipped to 16.3 percent from its historic high (since 1994) of 16.5 percent in June.
Notice that the chart only goes back to 1994, so it covers only the two most recent recessions. I wanted to go back to 1970, which would have covered seven recessions, but the BLS changed the way it counts the unofficially unemployed in 1994, so that's as far back as I could go with a strict, apples-to-apples comparison.
Based on that, here's what the chart shows: The gap between the officially and unofficially employed in 2000 -- just before the recession caused by the dot-com crash and 9/11 -- was at its smallest. This means that if you were unemployed at this time, you were the most encouraged you'd been since 1994 that you'd find a new job.
That gap peaked in March of this year, and has backed off just a little since then. This means that more people who are unemployed now have checked out of the labor force and just given up looking for work. It also means that more full-time employees have been reduced to part-time workers, as we will see in a moment. Official unemployment has risen swiftly from the beginning of the recession in December 2007 to now: From 4.9 percent to 9.4 percent in July.
But the rise in unofficial unemployment has been jaw-dropping: From 8.7 percent in December 2007 to 16.3 percent in July. The rate has nearly doubled and the gap between the two measures has increased more swiftly than it did during the previous recession.
The main reason I wanted this chart to go back farther was to capture the 1982-83 recession, when the official unemployment rate shot up to nearly 11 percent, the highest in nearly 40 years. So this chart is startling, to be sure. But what does it mean?
Harvard economist Lawrence Katz, a former chief economist at the Labor Department, was pinged to get his take on the data. His takeaway: This recession has been so bad, that even after businesses have laid off workers, they've been forced to reduce many of their remaining employees from full-time to part-time status. That's what happens when you have to cut to the bone. And then keep cutting.
"Workers on short hours (the underemployed or the involuntary part-time) account for 5.6 percentage points of the 6.9 percentage point gap between the unofficial and official unemployment rate measure," he wrote us by e-mail, "while those who have dropped out (discouraged and other marginally attached workers) account for only 1.3 percentage points in the gap."
While it may be "only 1.3 percentage points," that still translates to 796,000 people, an increase of 335,000 from last year. That's a lot of people checking out of the labor force. This number "is larger than the 2001 recession," Katz writes, "but we don't have comparable data for the 1982-83 recession since BLS tightened up on the definition of what is a discouraged worker" in 1994.
He did add, however, that if you look at the unofficial data from the 1982-83 recession (not an apples-to-apples comparison) it indicates that there were "much larger levels and increases" in discouraged workers in that recession than in this one. So, at least we've got that going for us. As you may remember, unemployment benefits were extended earlier this year as part of the $787 billion stimulus bill. We wondered if this would disincentivize the jobless from looking for work because the unemployment checks keep rolling in.
But Katz says just the opposite is true. "The increase in the length of unemployment benefits actually leads more people to continue to call themselves unemployed [as opposed to "discouraged"] and to stay connected to the labor force and searching for jobs," Katz writes. The unemployment benefit "extensions seem to be succeeding in keeping the unemployed attached to the labor force and not dropping out and going onto, say, disability programs."
Even if the recession ends in this quarter -- meaning positive growth in GDP -- unemployment is likely to continue to climb to at least 10 percent, economists and the White House say. Unemployment has continued to rise for several months after six of the past seven recessions. That's just what it does as a lagging indicator.
What we'll be watching for, however, is whether the gap between the officially and unofficially unemployed continues to grow. If it does, this recovery will take even longer than people think.
Thus, this month’s actual unemployment rate hit an all-time high of 16.8% for the month of August. I am like the Washington Post Ticker in the sense that I like to hammer on the official U.S. unemployment rate versus the unofficial rate, which we believe to be a truer picture of joblessness in this country.
The Labor Department said the official number climbed from 9.4 percent in July to 9.7 percent in August. But the unofficial number jumped from 16.3 percent to 16.8 percent. The difference between the two rates is due to who's counted among the unemployed.
The official number is arrived at by combining a rotating monthly survey of 60,000 U.S. households performed by the Labor Department's Bureau of Labor Statistics with jobs data sent in by employers. According to this measure, you are marked as "unemployed" if you're jobless and you meet certain criteria, including whether you looked for work in the previous four weeks.
The unofficial number starts with the official rate and then adds in everyone else who should be working full time but is not, including those whose hours have been reduced from full time to part time, those who have become so discouraged they have given up looking for work and others who are "marginally attached to the labor force." Many economists believe this rate is a truer measure of the health of the economy.
Last month, we did some numbers-crunching and found that unemployed Americans are so discouraged about the prospect of finding a new job that they're checking out of the labor force at the highest and fastest rate in nearly 10 years. Further, the recession has forced more full-time workers into part-time slots than at any time over the past 15 years.
Now we know that unemployment has continued to rise for several months after past U.S. recessions have ended. Many economists and even the White House have said (hoped?) that the official number will top out around 10 percent. But even if that's the case, you should not expect it to suddenly start dropping back down as soon as it peaks. Good guesses say it could be a matter of years before the official unemployment rate gets back down to a figure we're more used to seeing, something in the 5 percent range.
As for the unofficially employed -- now numbering nearly twice the officially unemployed -- the wait could be longer. Thus, their needs to perhaps a stimulus for the jobless and it might be a good time to redirect $ $400 billion to business tax cuts.
The recession may be over on Wall Street and Silicon Valley, but on Working Family Avenue it still has a ways to run. That's the lesson of yesterday's August jobs report that showed losses of 216,000, which believe it or not is the slowest monthly decline in a year and caused the White House to praise with the faint damn that the "trajectory is in the right direction." That's the good news.
On the other hand, the jobless rate popped up to 9.7%, the highest rate in 26 years, from 9.4%, reflecting an increase in the size of the labor force. The main concern we see going forward is the slow pace of new job creation to soak up the 7.4 million workers who have lost jobs since 2007.
There are now 26 million Americans who can't find a full-time job. Average weekly hours remained at an abysmally low 33.1—which is putting a strain on family budgets. And the jobless rate including so-called discouraged workers, or those who have stopped looking, leapt to 16.8% from 16.3% in July. Meanwhile, the number of Americans working part-time who want full-time work increased by 278,000 to 9.1 million, which as a share of the workforce is larger than at any time since the recession of 1982. These are the workers that employers will tend to hire first as a recovery unfolds, so it is worrisome that this cohort remains so large.
None of this does much for the credibility of the Obama Administration's stimulus spending plan, which was sold with the promise of a jobless rate this year of "below 8%" if the stimulus were passed. That was off by some three million jobs in a mere seven months. The same economists who fretted in February that $780 billion in stimulus was too small now claim that the $300 billion or so that has been spent has somehow ignited the recovery.
But a tax-cutting stimulus would have provided much more job and economic growth for the buck, and it could even now too. If the Administration really wants to fire up private job creation, how about taking the remaining $400 billion or more and using it to lower business taxes? The unspent stimulus is enough for a two-year down payment on repealing the U.S. corporate income tax, which studies show is a job and wage-increase killer.
Congress could also reconsider its July minimum-wage increase of 70 cents an hour, which almost certainly contributed to the leap in teenage unemployment to 25.5% in August. The rate was 24% in June and 23.8% in July, before the wage hike started to price low-skilled teens looking for jobs out of the workplace. Congress would be wise to suspend the increase until the overall jobless rate falls below 7%.
Of course neither of our proposals is going to happen given the current policy views in Washington, but someone has to speak up for workers who want a job, as opposed to those lucky enough to still have them.
I still believe an economic recovery is under way, and some job growth will certainly follow. But the danger is that the U.S. will recover with only European levels of job creation. The French and Germans have had a hard time bringing down unemployment even during expansions, thanks to the burden of high taxes, regulation and onerous union work rules. The economic agenda now pending on Capitol Hill includes all three of these burdens, so it's no wonder that employers are being super cautious before they add to their payrolls.
The U.S. economy is a remarkably resilient animal, and even deep recessions have always been followed by recoveries, usually strong ones. But businesses aren't going to rehire nearly as many workers amid the current policy uncertainty. Therefore with the unemployment rate being the highest since 1983, it is clear that the jobless really need an economic stimulus now more than ever before the official unemployment hits 10% or above and the unofficial unemployment hits 20% or above. So Main Street is continuing to suffer as Wall Street seems to have recovered so who really got an economic stimulus from Washington that is the real question.
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