Jared Bernstein of EPI also thinks we're heading for a "jobless recovery"--demand growth is too slow and productivity growth too high to generate a falling unemployment rate. I think he's more likely than not to be right, at least for the rest of this year.
Since its low point of 3.9% in October 2000, unemployment has increased by two percentage points, adding 2.9 million to the jobless rolls. Since job growth has been stagnant, these job seekers have been experiencing lengthy unemployment spells. With the exception of one month following the deep recession of the early 1980s, the median number of weeks spent unemployed-11.7 in June-was the highest since such data were first collected in 1948.
Long-term unemployment is a characteristic of a jobless recovery. Last month, the percentage of the unemployed looking for a job for more than six months was 19.4%, down slightly from May but 8.1 percentage points above the level in March of last year, when the recession began. During the last slow recovery in the early 1990s, the share of long-term unemployment peaked at 23.1%, seven months after the recession had officially been declared over...
July 5, 2002
Labor market shows signs of 'jobless recovery'
The nation's unemployment
rate rose slightly to 5.9% last month, and payrolls expanded by just 36,000,
according to today's report from the Bureau of Labor Statistics. Over
the past three months the unemployment rate has hovered around 6%, the
ranks of the long-term unemployed have grown, and private-sector employment
fell by 90,000 compared to the previous quarter. These are the signs of
a "jobless recovery," wherein growth in the overall economy
is too slow to drive the unemployment rate back down.
Since its low point of 3.9% in October 2000, unemployment has increased
by two percentage points, adding 2.9 million to the jobless
rolls. Since job growth has been stagnant, these job seekers have been
experiencing lengthy unemployment spells. With the exception of one month
following the deep recession of the early 1980s, the median number of
weeks spent unemployed-11.7 in June-was the highest since such data were
first collected in 1948.
Long-term unemployment is a characteristic of a jobless recovery. Last
month, the percentage of the unemployed looking for a job for more than
six months was 19.4%, down slightly from May but 8.1 percentage points
above the level in March of last year, when the recession began. During
the last slow recovery in the early 1990s, the share of long-term unemployment
peaked at 23.1%, seven months after the recession had officially been
declared over.
Today's report contains extensive evidence of labor market weakness.
Payroll employment was essentially unchanged in the private sector over
the past two months, up 7,000 in May and 13,000 in June. The labor force
contracted by 293,000 last month, and, while the monthly figure can be
erratic, labor force growth has clearly slowed.
Given the lack of job growth, the slowing of labor force growth is
not surprising, as potential workers decide not to enter the labor
market. Thus far this year, the annual growth of the labor force has been
0.4%, compared to 1.4% in 1999 and 0.7% in 2000. This slow pace of labor
force growth actually keeps the unemployment rate from growing more quickly,
since many of those who left or did not join the labor force would presumably
be unemployed if they sought work. Our forecast suggests that, had the
labor force kept growing at its earlier pace, and had half of the added
members of the labor force failed to find work, the unemployment rate
would be 6.6% instead of its actual rate of 5.9%.
Wage growth has slowed along with job growth, as weaker conditions
lead to less pressure to raise wages compared to the tight labor market
conditions of the latter 1990s. Although wages grew faster in June than
in May, annualized wage growth in the second quarter was 2.6%, the slowest
quarterly growth rate since the first quarter of 1995, when wages first
began to accelerate. Since annual inflation has been running above 3%
over the past three months (March-May, the most recently available data),
some workers are experiencing falling buying power.
Unemployment increased most last month for younger workers (age
16-24), from 11.6% to 12.2%. The rate for African Americans also increased
by half a percentage point, to 10.7%. Since its low point of 7.3% in September
2000, black unemployment is up 3.4 points, compared to 1.9 for the overall
rate.
The service sector, which added 70,000 jobs in May and has recently
been a strong source of job growth, grew by only 33,000 last month.
Part of this slower growth represents lack of hiring of temp workers in
June. Health services, however, added 34,000 jobs in June and continues
to be a consistent growth sector.
The current U.S. employment picture is discouraging. The jobless
rate is stuck near 6%, and job growth is flat; private sector payrolls
actually declined in the second quarter. Wages grew more slowly in the
second quarter than in over six years, and the ranks of the long-term
unemployed are historically high and, by some measures, growing. Much
faster economic growth is needed in order to convert this jobless recovery
into a jobs generator.
—Jared Bernstein, with research assistance by Thacher Tiffany
The Economic Policy Institute JOBS PICTURE is published each month upon release of the Bureau of Labor Statistics' employment report.
Posted by DeLong at July 06, 2002 12:08 PM | Trackback