Sunday, March 8, 2009

US unemployment and changing job market

The employment figures for February shows that the US economy lost 651,000 jobs, as the unempoyment rate surged to 8.1% from 7.6% in January, the highest rate since December 1983. Since the recession began in December 2007, the US economy has lost 4.4 million jobs, with 2.6 million disappearing in the last four months alone.

The figures are even more dismal when taking into account the broadest measure of unemployment and underemployment, including those who have stopped looking for work because they don’t believe they can find jobs and part-time workers who want to be working full time, was 14.8%, as compared to 16.3% in December 1982. If the trends continue for a couple more months, the recession could surpass 1982 to become the worst since the War in job-losses. As the graphics below indicates, the current declines make it one of the steepest declines in the post-war era.

It is believed that in key industries — manufacturing, financial services and retail — many companies are making strategic decisions to abandon whole areas of business. This difference in job-loss landscape and the extent of declines raises questions about the traditional government response of handing out temporary unemployment insurance checks so as to cushion the unemployed till economic growth is restored. It is now being argued that the government needs to place a greater emphasis on retraining workers for other careers. Many of those who have been laid off in sectors like automobiles and even financial services may never find similar types of jobs.

Further, unlike the previous recent recessions, when white-collar employees were worst hit, this one is causing much more job loss among the less educated than among college graduates. The brunt of the layoffs in this recession is falling on construction workers, hotel workers, retail workers and others without a four-year degree. The real estate boom since the second half of nineties reversed the employment profile among men without college education. At the start of this decade, the construction sector employed more men without a college education than the manufacturing sector did,whereas in 1980, three times as many such men worked in manufacturing as construction.

The job losses this time are hurting men more than women, homeowners and investors more than renters or retirees who rely on Social Security checks, Latinos more than any other ethnic group. An interactive graphic of the region-wise job losses indicates that both coasts have been the worst hit.

Interestingly, David Leonhardt feels that the recession could, in the long run, end up reducing inequality. He cites three reasons - stock market crash will compress incomes at the top; Obama administration's plans to raise taxes; and increased focus on schooling (The Great Depression saw a great surge in school enrollment as teenagers who once would have dropped out to do factory work instead stayed in high school).

Update 1
Unemployment figures in the US touched 8.5%, with 663,000 jobs being shed in March 2009, taking the total jobs lost in the recession to 5.1 million. Jobs report FAQ here, reactions here, and comparisons between private and public sector here. Economix has this comparison of job losses this time with previous instances.

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