Sunday, October 4, 2009

Unemployment and growth update

The graphics below tell all the story

Eight million jobs or 5.8% of all jobs have been lost in the 21 months of the current recession, the worst in any recession since the War.

The employment-population ratio (the ratio of employed Americans to the adult population) and the Labor Force Participation Rate (the percentage of the working age population in the labor force) fell to 58.8% and 65.2%, both being the lowest since early eighties. When the job market starts to recover, many of these people will reenter the workforce and look for employment - and that will keep the unemployment rate elevated for some time.

As a share of employment, this recession is easily the worst. Since the recession began in December 2007, the economy has had a net loss of about 5.2% of its non-farm payroll jobs.

The state and local government payrolls have turned pro-cyclical, dropping off, while the spurt in federal government payrolls appears to be falling.

Even at the worst points of the worst recessions of the 1970s and 1980s, never has the number of hours worked per US person been lower than it is now. It is believed that many of those jobs will never come back, and if they are replaced at all it will be with lower-wage, lower-skill service-industry jobs.

Macroblog compares the lags between peak unemployment and end of recession, and that between the start of federal funds rate tightening and the peak unemployment rate and finds considerable variations in previous recessions and no discernible trends. However, it is clear that unemployment will continue to lag behind substantially even as the recovery gathers steam. See also this, this, this, this, and this.

Update 1
October unemployment report shows a rise in joblosses by 190,000 and puts the unemployment rate at a 26 year high of 10.2%. Inclusive of all forms of joblosses, the unemployment rate is 17.5%. Since the recession began in December 2007, the economy has had a net loss of about 5.3% of its nonfarm payroll jobs or more than 7 million jobs, and nearly 16 million people are unemployed now.

See also this, this, this, this, this, and this.

Casey Mulligan on why it is likely to be a "jobless recovery". Graphic indicating the periods for which people have been out of work. Economix on work sharing programs wherein employers reduce their workers’ weekly hours and pay, often by 20 or 40 percent, and then government make up some of the lost wages, usually half, from their unemployment funds. Under implementation in mainland Europe, mainly Germany. Paul Krugman makes the case for such programs in US which seek to temporarily save jobs.

Update 2

Floyd Norris provides more evidence that the current recession in the US is the worst since the Great Depression, atleast from the unemployment front. Over the last three years — since October 2006 — the overall unemployment rate has risen by 5.8 percentage points, the largest such increase since the Great Depression, providing another indication of the rapidity and severity of the current downturn.

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