U.S. unemployment increases to 14-year high

Graph showing U.S. unemployment rate. From The New York Times.

There is just so much economic news to talk about this week. From The New York Times:

In a sign that American workers may face even more difficult times for many months to come, the nation’s unemployment rate last month jumped to the highest level in 14 years as job losses mounted.

Gloomy enough was word from the government on Friday that a fresh 240,000 American jobs disappeared in October, the 10th consecutive month of retrenchment. It brought the toll of lost jobs to 1.2 million for the year — more than half in the last three months alone — while the unemployment rate climbed to 6.5 percent. Worse was the sense that little could be done near term to alter this now-accelerating trajectory.

President-elect Barack Obama, speaking at his first news conference since winning Tuesday’s election, sounded resigned to inheriting a starkly troubled economy when he moves into the White House next year.

“It’s not going to be quick, and it’s not going to be easy to dig ourselves out of the hole that we’re in,” Mr. Obama said, calling for swift passage of spending measures aimed at stimulating the economy, including another extension of unemployment benefits.

But while experts said this could soften the damage, it was unlikely to change the fundamentals. They said the economy would probably lose several hundred thousand jobs a month well into next year, taking the unemployment rate to near 8 percent — a level last seen a quarter-century ago.

“The economy is slipping deeper into a recessionary sinkhole that is getting broader,” said Stuart G. Hoffman, chief economist at PNC Financial Services Group in Pittsburgh. “The layoffs are getting larger, and coming faster.”

Economists are expecting the unemployment rate to rise to nearly 8 percent? I'd say the unemployment rate would be even higher. The unemployment rate measures those Americans collecting unemployment checks, and if you've exhausted your unemployment compensation, then you are dropped from the unemployment rolls. The unemployment rate also does not measure those Americans working part-time, or are underemployed in jobs that are below their skill set. According to the NY Times:

The number of unemployed Americans leapt in October to 10.1 million — the largest number since 1983. More than 22 percent of all unemployed people have been out of work for six months or longer — another level not reached in a quarter-century.

Only 32 percent of all unemployed people were drawing state benefit checks in October because of restrictions on eligibility. More than half of all unemployed people drew benefits in the 1950s, and about 45 percent received state checks during the last recession in 2001.

[....]

The jobs report reinforced how a potent assemblage of troubles — plunging housing prices, tight credit and shrinking paychecks — was combining to drag the economy down, depriving consumers of cash.

All through the year, companies have hired tepidly and begun to lay off workers as their sales sagged, while cutting working hours for those on the payroll. That trend continued in October: the so-called underemployment rate — which includes those who have lost jobs, people working part time for lack of full-time positions and those who have given up looking for work — rose to 11.8 percent from 8.4 percent a year earlier.

The pace of layoffs has accelerated in recent months. From January to August, the economy lost about 75,000 jobs a month. In September alone, 284,000 jobs vanished, the Labor Department now says, revising its initial estimate of 159,000.

“What you see now is this cascading of unemployment moving from hours cut to hiring freezes to layoffs,” said Jared Bernstein, senior economist at the labor-oriented Economic Policy Institute in Washington. “There’s almost no economic activity out there that’s going to generate jobs right now. This is the front edge of the deeper trough of the recession. It’s going to get worse before it gets better.”

Now according to this April, 2008 MSNBC story on underemployment, economists were expecting the unemployment rate to jump from 4.8 percent to 5 percent in February, 2008. However, Keith Hall, the commissioner of the Bureau of Labor Statistics, testified before Congress that the underemployment rate stood at 8.9 percent in February, up from 8.1 percent a year ago. The underemployment rate was about doubled the rate of unemployment.

I also found this interesting statistic on underemployment:



From 1994 to 2005, the underemployment rate is just about doubled to what the unemployment rate has been. According to the Economic Policy Institute:

Over the past 18 months, 3.3 million workers have been added to the jobless rolls, and there are currently 10.1 million unemployed workers in this country. The unemployment rate rose from 6.1% in September to 6.5% in October, its highest rate since March 1994. Underemployment, a more comprehensive measure of the extent of labor market weakness, rose to 11.8%, its highest level in over 14 years. Underemployment’s growth is primarily due to a surge in people working part-time but wanting full-time jobs—up 645,000 from September to October, and by 2.3 million over the past year.

If economists are predicting the U.S. unemployment rate to rise to almost 8 percent, then we could be expecting an underemployment rate of almost 16 percent! We are only getting half the story here on the jobless picture. It is going to get far worst, than people getting laid off of jobs. You still have the problem of people being underemployed, or dropping out of the job market all together. And these people are also consumers, who will certainly cut back on their spending--remember, consumer spending accounts for two-thirds of the U.S. economy.

The unemployment, and underemployment, picture is just another example of just how bad this U.S. economy is heading.

Update: It appears that the U.S. job market is getting worst for the working poor and the young. From The New York Times:

Labor experts say the hardships of the gathering recession are sweeping down to hurt the working poor and younger job seekers most of all.

From the fall of 2007 to this October, the share of 16-to 19-year-olds working fell by 8 percent, the largest decline of any age group, and the outlook for youths and low-skilled workers in coming months is bleak, economists say, with the industries most apt to employ them, like home-building and retail sales, taking steep dives. On Friday, the Bureau of Labor Statistics reported that 240,000 jobs disappeared in October alone, bringing the unemployment rate to 6.5 percent. But construction, for example, had the highest unemployment rate of any industry: 10.8 percent, compared with 6.1 percent a year ago, leaving entry-level applicants in the cold.

“Low-income people are the big losers when the economy turns down,” said Andrew M. Sum, director of the Center for Labor Market Studies at Northeastern University. With jobs scarce, many college graduates find themselves taking jobs that do not require a degree, and laid-off middle-income workers are taking lower-paying jobs in areas like retail sales. A kind of domino effect is beginning to squeeze out the least skilled or experienced workers — those already on the bottom of the ladder — who are settling for part-time employment and fewer hours if they can find work at all. Hardest hit of all are younger job-seekers, especially black males in their late teens or early 20s without more than a high school education.

Among those ages 16 to 19, access to part-time jobs, full-time jobs and summer jobs had already declined through this decade, and by last month only 31.4 percent had held some sort of employment. In the year ahead, Professor Sum predicted, “The teens will be thrown out of the labor market at record levels,” often causing hardship for poor families and causing youths to miss experience that, studies show, will gain them better jobs in the future.

[....]

The one age group whose employment rate climbed over the last year was people over 65, who are starting to take the part-time and retail jobs once dominated by students and younger high school graduates, Professor Sum said.

A recession takes its largest tolls not only on the young but also in cyclical industries like construction, manufacturing of durable goods, retail trade, hotels and temp agencies — traditional avenues into the workplace for the less skilled.

The crash in construction jobs is most acute in housing, which tends to use a greater share of inexperienced labor than commercial construction does, said Ken Simonson, chief economist for the Associated General Contractors of America. Looking at economic projections, Mr. Simonson said, “I’d expect even more of those low-skilled jobs will be lost.”

What is especially interesting to note here is that not only is the U.S. economy shedding the low-wage retail and construction jobs, but that the same jobs are being targeted by both college graduates and the over-65 people. The college grads probably cannot find the higher-skilled, middle-income jobs that are also being shed in the marketplace, while the over-65 crowd is going back to work to supplement their retirement income, or to possibly pay for rising costs--especially health insurance. So the working poor, and the young, are getting squeezed off the ladder altogether.