August 01, 2008
August 1, 2008 (Jobs Byte)
By Dean Baker
“The index of hours worked is down by 1.1 percent from December.”
The unemployment rate rose 0.2 percentage points to 5.7 percent in July, its highest level since March of 2004. The establishment survey showed a loss of 51,000 jobs overall, with the private sector shedding 76,000 jobs. The private sector has now lost 665,000 jobs since it began shedding jobs last December. The economy as a whole has lost 463,000 jobs since December.
The rise in the unemployment rate was driven by a 0.4 percentage point rise in the unemployment rate for men. The male unemployment rate now stands at 6.1 percent, the highest since November of 2003. The unemployment rate for women remained unchanged at 5.2 percent. The large gap in unemployment rates for men and women is typical for periods around recessions.
Other measures of labor market health also indicate weakness. The number of workers working part-time involuntarily jumped by 291,000. This number is now 1,741,000 above the low for the cycle in April of 2006. Partly as a result of the large rise in the number of involuntary part-time workers, the Bureau of Labor Statistics U-6 measure of labor underutilization, which includes discouraged workers and involuntary part-time workers in addition to those counted as unemployed, rose to 10.3 percent in July. This is only slightly below the 10.4 percent peak in the last downturn, which was reached in September of 2003.
Older workers continue to gain jobs with the number of employed people over age 55 rising by 128,000 in July. Employment for workers under age 55 fell by 200,000. The sharpest falloffs were a loss of 89,000 jobs for workers between the ages of 35 and 44, and a loss of 97,000 jobs for teens.
Other measures in the household survey also indicated a further weakening of the labor market. The percentage of unemployment due to workers quitting their job dropped from 9.8 to 9.7 percent, the share of the long-term unemployed jumped from 18.4 percent to 19.1 percent (although this is partly due to the extension of benefits), and the number of discouraged workers rose sharply.
On the establishment side, the bulk of the job loss continues to be in construction and manufacturing, but most sectors are reporting job losses. Construction lost another 22,000 jobs, with both residential and non-residential sectors shedding workers. With non-residential construction likely to fall over the rest of this year, this sector will almost certainly continue to shed jobs even if housing construction bottoms out.
Manufacturing lost 35,000 jobs, almost exactly its average rate of decline over the past year. The job losses were widely spread across sectors. Retail lost 16,500 jobs in July, with half the decline attributable to a loss of 8,400 jobs in car dealers. There will almost certainly be much further decline in employment in dealerships as the falloff in car sales leads to closings.
Transportation lost 5,800 jobs, almost all of it due to a loss of 5,100 jobs in trucking. To date, the airline industry has shed very few jobs (employment is up from a year ago), but this will likely change in the next two months given the announcement of large layoffs by most major carriers. The temporary help sector lost another 29,000 jobs, another indicator of labor market weakness.
The two big job gainers continue to be health care (32,900) and state and local governments (28,000). With budget deficits forcing cutbacks in many governments, this growth is almost certain to slow, if not reverse.
Consistent with the reported growth of part-time employment in the household survey, the average workweek fell by 0.1 percent in July and the index of aggregate hours for production workers declined by 0.4 percent. This index now stands 1.1 percent below the December level. Nominal wage growth appears to be stable at a 3.3 percent annual rate, more than a percentage point below the rate of inflation.
There seems little prospect that the job loss will stop any time soon. In all probability it will accelerate with more rapid losses in airlines, retail trade, and real estate, and slower job growth in health care and state and local governments.
Dean Baker is the Co-director of the Center for Economic and Policy Research. CEPR’s Jobs Byte is published each month upon release of the Bureau of Labor Statistics’ employment report. For more information or to subscribe by fax or email contact CEPR at 202-293-5380 ext. 102, or warner [at] cepr [dot] net.
