[OPE-L:7116] It does not seem US recesion is over

From: Alejandro Valle Baeza (valle@servidor.unam.mx)
Date: Sat May 04 2002 - 13:45:19 EDT

Jobless rate jumps to 6.0%, wages stagnant

The nation’s unemployment rate rose to 6.0% last month, according to today’s report from the Bureau of Labor Statistics, providing further evidence that the labor market is still struggling to pull out of the recession that began in March 2001. Payroll employment grew by 43,000, but because March payroll data were revised downward, April marked the first month of positive employment growth since July 2001. Unemployment durations—the time spent unsuccessfully seeking work—are also climbing, and the absence of pressure in the labor market has led to average hourly wage growth that is no longer surpassing inflation.

Given last month’s increase in the labor force, as well as the need to re-absorb the millions who were laid off over the recession, the current rate of economic growth is too slow to generate enough jobs to keep unemployment from rising in coming months. While an official recovery has not been declared yet, recent labor market data suggest that, unless growth picks up soon, the U.S. risks the danger of a jobless recovery.

Unemployment is now up over two percentage points from its low of 3.9% in October 2000. Since then, the ranks of the unemployed have grown by slightly over three million persons. While women saw the largest increase last month, growth in unemployment was generally broad based, implying that weak labor market conditions are affecting most groups. Increases in unemployment occurred at each education level: joblessness among both high school and college graduates went up by 0.3 percentage points, while high school dropout unemployment rose by one percentage point to 9.0%. The rate for college graduates—3.0%—is the highest since May 1993, implying that even those with relatively higher skill levels are having difficulty in the current labor market.

The unemployed are clearly having difficulty finding work. The share of the long-term unemployed—those unsuccessfully seeking work for 27 or more weeks—rose 1.3 percentage points to 17.6%. Over the past three months, this share is up 3.7 points, a larger three-month gain than was seen in either of the last recessions. The average number of weeks spent unemployed, at 16.6, is up more than four weeks since unemployment bottomed out in October 2000. Thus, the weak labor market has meant an extra month of unemployment, on average, for those unsuccessfully seeking work.

The share of long-term unemployed (27 weeks or more), January 2000-April 2002
[Click figure above to view larger graphic]

Payrolls expanded by 43,000, the first positive growth since last July (March’s 58,000 increase was revised to a 21,000 loss). When looking at three-month averages, payrolls are down 112,000 jobs in total and 174,000 in the private sector, the latter being more indicative of the current strength of labor demand.

On the positive side, service employment expanded by 87,000 in April on top of an increase of 72,000 in March. Most of these gains (80%) are explained by the increase in temporary help, a sector that contracted significantly over the recession and now appears to be bouncing back. These new hires most likely signal that employers are testing the waters of the forthcoming recovery, but are as of yet unwilling to commit to new permanent hires. Although the rate of manufacturing job losses has declined in the past few months, employment in this sector contracted by 19,000, marking 21 consecutive months of factory job losses.

The slow rate of job creation and the rising unemployment rate have contributed to slower hourly wage growth for production, non-supervisory workers. Over the past three months, wages grew at a 2.8% annual rate, slightly below the 3.0% annualized rate of inflation in the first quarter.

Even with strong GDP growth in the first quarter of the year, today’s jobs report, which marks the first look at second quarter data, reveals a labor market that is adding too few jobs to prevent rising unemployment. Longer unemployment durations and 6.0% unemployment are also taking a toll on wage growth, which is now stagnant on average.

Jared Bernstein , with research assistance by Thacher Tiffany
Economic Policy Institute

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