Layoffs Slacken. U6 Soars to 17.5%

[bumped - BarbinMD]

Nonfarm payroll jobs fell another 190,000 in October, and the U3 unemployment rate calculated by the Bureau of Labor Statistics rose to 10.2%, it was announced this morning. The layoffs were higher than the 175,000 consensus of 84 economists surveyed beforehand by Bloomberg. But the number was also the lowest monthly job loss recorded since August 2008, an indication that the grim job market is improving, but with painful slowness. Earlier predictions by some analysts of a possible net growth in manufacturing jobs failed to pan out. Instead, 61,000 jobs were shed in that sector.

The percentage of officially unemployed Americans rose to the highest level since April 1983, with 15.7 million out of work. An alternative gauge of unemployment used by the BLS, U6, rose to 17.5%, or 27 million Americans. Unlike U3, the U6 figure includes "discouraged workers" and those who are employed part time only because they can’t find full-time jobs.

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*Numbers in the above chart do not include the 824,000 lost jobs that the BLS will add in its January adjustment to be published Feb. 5.

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The BLS report also noted:

• The average workweek for production and non-supervisory workers held steady at 33 hours.

• The number of long-term jobless (27 weeks or longer) rose 200,000 to 5.6 million, some 37% of the total who are unemployed. (President Obama will this morning sign the extension of unemployment insurance that was passed by Congress this week after several weeks of Republican obstructionism ignored the plight of workers exhausting their benefits.)

• The U3 rate by gender: men – 10.7%; women – 8.1%. By race: whites – 9.5%; Asian Americans – 7.5%; African Americans – 15.7%; Latinos – 13.1%. The teenage rate (aged 16-19): 27.6%

• Hiring of temporary seasonal workers increased by 34,000 for a total of 44,000 since July.

• August job losses were revised from 201,000 to 154,000, and the losses for September were revised from 263,000 to 219,000.

• The Labor force participation rate sank to 65.1% in October. The employment to population ratio also fell, to 58.5%.

Although some optimists suggest that net positive job growth will begin in the fourth quarter, just as gross domestic product grew in the third quarter, other analysts see that milestone arriving as late as March. Whenever that job growth does occur, it may be anemic. If it is, we could see what was anomaly in the previous two recessions (before the current one) become the standard. That is, a "jobless recovery" marked by much longer lags between the time GDP recovers to its pre-recession level and when the economy employs as many people as had jobs at the recession’s beginning.

Looked at another way, we could have a so-called V-shaped recovery in GDP, with an L________-shaped recovery in jobs.  

Here’s some historical data. In the four most recent previous recessions, the bounceback to pre-recession levels went like this:

• 1973-75 - GDP: 24 months; Jobs: 24 months
• 1981-82 - GDP: 24 months; Jobs: 28 months
• 1990-91 - GDP: 18 months; Jobs: 31 months
• 2001     - GDP:   6 months; Jobs: 47 months

^{Click for larger version of this Calculated Risk chart.}

The last time a GDP recovery and job recovery were close to a match came after the recession that ended in late 1982. While that turnaround had its own problems, Eugene H. Becker and Norman Bowers wrote in the February 1984 issue of the BLS's Monthly Labor Review:

The end of 1983 marked a year of recovery from one of the longest and deepest post-World War II  recessions. Improvement in the employment situation compared favorably with previous recovery periods. Spurred primarily by a surge in consumer spending, particularly on durable goods such as housing, appliances, and automobiles, real gross national product picked up sharply in the spring and summer months. Overall, real GNP grew by about 6 percent over the year (fourth quarter 1982 to fourth quarter 1983), compared with a decline in the prior year.

Industrial production, which had fallen by just over 12 percent during the 1981-82 recession, increased steadily throughout the year. By yearend, the index had risen by more than 15 percent, with the biggest increases occurring
among durable goods manufacturers.

Concomitant with the improvements in production and spending came sharp gains in employment and reductions in unemployment . While comparatively stagnant in the first quarter of 1983, total civilian employment grew rapidly during the remaining quarters and posted an overall increase of 3.9 million between the 1981-82 recession trough of November 1982 and December 1983. Nonfarm payroll employment increased by 2.9 million over the same period.

The two go on to explore the details in depth. The disconnect between a quarter-century ago and what American working stiffs now face is readily apparent. Ignoring for the moment all those long-standing issues underlying this and other recent U.S. economic crises – stagnant wages, off-shored jobs, a tax code favoring upward transfers of wealth, corporate concentration, and profound conflicts of interest by high government officials, to name a few – today’s counterparts of the consumers who drove previous recoveries live in a different world.

They are heavily indebted and 5.6 million of them have already been out of work longer than the duration of the entire 1981-82 recession. Good news in productivity improvements, vastly reduced layoffs, unexpected improvements in automobile sales and the first GDP expansion in four quarters are tempered by the fact we’re moving upward off very low bottoms, and by bad news like increased bankruptcies, dramatic increases in foreclosures in previously stable cities, and the coming tsunami of lay-offs caused by state budget crashes. Moreover, that touted engine of job growth, small businesses, are having a devil of a time getting the loans they need from the banks the taxpayers bailed out.

Sometime, most likely late in the first quarter of 2010, but possibly sooner, net positive job growth will return. But without further government stimulus – a most difficult sell in Congress these days – the speed with which we get back to where we were two years ago is likely to be torpid. The disconnect between the GDP recovery and the job recovery could expand even more.

To some people that kind of talk bespeaks unwarranted gloom and doom on a day that should be devoted solely to cheers because the job loss numbers are at a 14-month low. To others it’s the view without rose-colored glasses. Only time will tell whose perception turns out to be more accurate.