The Bureau of Labor Statistics monthly Job Openings and Labor Turnover Survey (JOLTS) report was released Tuesday, and it lived up to its acronym. In March, the number of job openings decreased by another 256,000. That made for a total of 2.7 million job openings. In December 2007, when the recession began, there were 4.4 million openings. With 13.2 million Americans officially out of work, that means there are now 4.8 unemployed people for every available job.
The JOLTS survey always appears a month behind the BLS unemployment statistics, which were released last Friday. Despite the welcome drop in the numbers of Americans who lost jobs in April, the additional 563,000 Americans who joined the unemployed queue means next month's JOLTS is certain to put the ratio of jobless to available jobs above 5.0.
Heidi Shierholz, Economic Policy Institute
Some of us who closely follow economic news think the glass is half full. Some of us think it is half empty. And some of us think that something is seriously wrong with the glass.
Whichever category we fall into, or straddle, we all recognize that unemployment numbers are "lagging indicators" of economic health. Which means they don't start getting bad before there's a major drop in "leading indicators" - such as the real money supply, interest rate spread, supplier deliveries, stock prices and consumer expectations. And, because they lag, unemployment numbers - which is to say, the sum of people out of work - don't start improving until after the leading indicators have improved. Sometimes, well after.
Basic, straightforward, perfectly understandable economics. In its simplest, unnuanced form, companies don't usually start laying people off until it's clear that a drop in business is going to be more than temporary, and they don't start hiring them back until it becomes clear an rise in business isn't going to be more than temporary. The lag time. Inevitable. Totally expected. Makes no difference whether we're talking about official low-ball counts of unemployment or higher alternative rates.
One reason some observers are more pessimistic about the economy than they may have been in the past is recent history.
The lag for eight out of the first 10 post-World War II recoveries averaged four and a half months. That is, from the time the recession ended until the time the unemployment rate began to decline.
So, when the leading indicators during these recessions started looking good, out-of-work people had every reason to believe they would soon be employed again. However, after the ninth recession in 1991-92 ended, it took 16 months before the unemployment rate started going down. It was then that "jobless recovery" was coined.
After the longest period of economic expansion in U.S. history, 37 quarters, another recession began in March 2001. Eight months later, in November, presaged by upticks in the leading indicators, a new round of economic expansion began. But, for the next 21 months, the unemployment rate in the private nonfarm sector continued to rise. In other words, the total number of people officially without a job increased. And it wasn't until February 2005 that we reached the same number of jobs as before the recession had begun 47 months previously. Meanwhile, the population had grown significantly.
The current recession has now begun its 17th month. It's already longer than any recession since the 1930s. If it were to end this month and the unemployment rate started dropping in line with the average timing of the two most recent recoveries, it would mean no relief for the jobless until Christmas 2011. And that would only mark the beginning of a drop in the unemployment rate.
Thirty-six percent of out-of-work Americans receive unemployment benefits, but without further government intervention, they will have long since exhausted them by 2011. The rest get nothing. And, of course, that bogus official rate of unemployment doesn't count either the underemployed or those so discouraged they've stop looking for a job.
A good grasp on whether the federal stimulus money now slowly making its way into the labor market will create the 3.5 million jobs that the administration has claimed for it won't be had until a report from the President's Council of Economic Advisors is completed in August. The White House certainly couldn't have been happy to learn Tuesday that many states are laying off thousands of employees because the $135 billion portion of the stimulus package allocated for them isn't enough the staunch their bleeding budgets.
The layoffs are one early indication of how the stimulus funding could be coming up short against the economic downturn. As the stimulus plan was being drawn up, there was agreement among the White House, congressional Democrats and many economists that a key goal was to keep states from making big layoffs at a time when 700,000 Americans were losing their jobs every month.
The House passed a stimulus bill with $87 billion in extra Medicaid funding for states, as well as $79 billion in "stabilization" money to plug gaps in states' budgets for education and other areas.
But in the Senate, the stabilization funding was cut by $40 billion to secure the support of the three Republicans who were needed for a filibuster-proof 60 votes -- Sens. Susan Collins and Olympia J. Snowe of Maine and Sen. Arlen Specter of Pennsylvania -- as well as to gain the support of conservative Democrats such as Sen. Ben Nelson of Nebraska. The senators wanted to reduce the package to less than $800 billion, and several wanted to make room for a $70 billion patch of the alternative minimum tax.
Supporters of the final $787 billion bill, which included $25 billion less in state aid than the House plan, said it would help states avoid severe cuts. But tax revenue is coming in even lower than feared. ...
In some states, layoffs are occurring partly because legislators are not taking every step to avoid them. Republican lawmakers in Missouri want to use less than a third of the state's $2.1 billion in flexible stimulus funds to close budget shortfalls. They want to proceed with cutbacks and return $1 billion of the money to residents in the form of tax cuts. Using the money to plug budget gaps, they argue, will leave a deficit once the stimulus money is gone in 2011.
If the news from the leading indicators turns out to be as positive as the consensus now believes, the end of the recession (except for the unemployment part of it) could indeed be close at hand. But if the official unemployment rate continues its run toward double digits, foreclosures continue at a record high, and problems with the financial sector that numerous critics say were papered over by the "stress tests" worsen, then popular calls for an extra stimulus will surely rise. In the face of a $1.8 trillion deficit, congressional resistance to that from Republicans and Blue Dogs will be difficult to overcome. This will add problems for a President who has before him what is unarguably the biggest plate of crises in a long, long time.