Gloomy employment milestones

July 2, 2009

There is normally something for both optimists and pessimists in the monthly employment report.

When the payroll figures are disappointing, the unemployment rate is frequently better than expected. This month is no exception. While payrolls plunged by nearly half a million, unemployment barely budged.

On closer inspection there is little comfort in this report even for the most dogged optimist. The fact that unemployment only rose slightly was chiefly a result of a 155,000 decline in the size of the labor force. This could be noise, or a sign that discouraged workers are abandoning their search.

For statistical connoisseurs there were two alarming milestones. Since the start of the recession in December 2007, 6.5 million jobs have been lost – more jobs than were created during the previous business cycle. According to Heidi Shierholz at the Economic Policy Institute, this is the first recession since the 1930s to erase all of the employment creation from the preceding cycle.

The second discouraging sign is that the proportion of those out of work for more than six months is at its highest level since 1948, when records begin. Almost a third of the jobless are now classified as long-term unemployed – up from about 19 percent last year. This is bad news for U.S. productivity. As people stew on benefits their skills tend to atrophy. With more highly educated workers losing their jobs, this problem could get worse.

The figures are bound to be used as evidence that Obama’s costly stimulus package has been a dud. This is unfair. The time lags in fiscal stimulus are long. Payroll deductions were scaled back only a few months ago and much of the infrastructure spending will take many months to filter through. In addition the president’s package was never likely to halt the rise in unemployment, merely to slow it.

The figures should send the loudest signal to the Federal Reserve, which is still on the front line. Its credit easing program has always offered the best hope of economic stabilization. Recently the Fed has become less active.

The Fed should now put its foot back on the gas.

4 comments

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

Gloomy unemployment milestones are one thing, but let’s consider the underemployment rate as well. That’s an elusive figure, but needs to be given consideration in the grand scheme of the economy. The thought that people are giving up their job searches is somewhat skewed. The vast majority of people in this country need to work to have a place to live, eat, pay bills, etc. Without working and after the unemployment benefits expire, they are effectively freeloading off of someone who is either working to support them, or they have a pile of money in the bank. I would venture to say that most unemployed fall into neither category. Simply abandoning a job search is not an effective option. And yes, Mr. Obama’s stimulus package is a complete dud. He stated previously that if the stimulus package did not pass congress, the unemployment rate “could reach 9%”. It’s now well over that mark. Paying out billions of taxpayer dollars to subsidise a failing auto industry, banks, insurance companies, and mortgages for those who chose their fate, and of course continuing to hand out millions of dollars in bonuses, is completely absurd. Where did the AIG money go? Where did the GM and Chrysler money go? Where did the bank bailout money go? Hmm, no one really knows, or seems to care. Let’s not look to the government to solve our problems. We need less government, not more. By the way, the federal government is one industry that has been experiencing exponential job growth over the past few months. Maybe we should all apply.

Posted by Frank | Report as abusive

We’ve had about 25 years of deregulation going in this country–god do I wish we could rely on at least some of it’s theories because it’s about all Americans have faith in isn’t it?…why is every major sector of the US economy in financial trouble–from autos to housing to the newspaper business, to banking.
And, Frank where is all the mortgage ‘money’ that was lent to drive up the housing bubble.
The federal government sure didn’t take it all did it?

Posted by Terence | Report as abusive

Each country needs to keep some manufacturing which should not be considered protectionism….has anything been done about changing the trade laws so this can be accomplished …I don’t think so..Why because excessive corporate profits are at stake….It may take a while but America needs to learn that when you toss out the middle class or fail to provide them a decent wage, they can’t save or buy to keep a capitalistic economy going…It simply doesn’t work when the top 2% skill off 80% of a countries wealth!!

Posted by Jerry | Report as abusive

well a very good article, and sinc eI am in the job market I found some work on this website
http://www.bigjobsboard.com/index.php
quite a few techie jobs availabloe

Posted by howie | Report as abusive