More On Unemployment In The US

Let’s follow-up last week’s post on unemployment with a link to a NY Times blog post that discusses how many of the current recession’s job losses are likely to be permanent, and how long-term unemployment is at an all time high.

From the NY Times:

“…the percentage of unemployed who lost jobs, with no expectation of retaining the old job, is at the highest level since the government started collecting that data in 1967. It is reasonable to think those people are more worried, and less willing to spend, than are those who feel sure it is just a matter of time before they get back to their old jobs.

Here’s the current breakdown of the unemployed, by cause:

Lost job, other than layoff, 48.5%

Layoff, 12.6%

Left job voluntarily, 8.0%

Returning to labor force, 24.1%

New to labor force, 6.8%

(It is worth noting that the word layoff is used in its traditional sense - a temporary job loss until business improves. Many companies now use the word layoff to mean any firing, or at least any firing that is not for cause. Those “laid off” workers are counted in these numbers as “other than layoff.”)

The cyclical peak for the proportion of unemployed who lost their jobs for reasons other than layoffs were:

2001-03: 43.6%

1991-92: 44.9%

1980-82: 43.2%

1973-75: 36.3%

This is a secular change in the economy, and one that helps to explain why consumer fears can be much greater than they were when the overall unemployment rate was higher.

Something else that should be considered is that there are undoubtedly a large number of people who are under-employed, either in terms of total hours employed (FT vs. PT) or having to accept significant reductions in pay & benefits just to get a job. Think: someone loses their high-paying manufacturing job, and are forced to take a lower paying job with Wal-Mart (WMT) to make ends meet.

To be sure all of the phenomenon mentioned above occurred during the last recession, and they also played a part in the “jobless recovery” that followed. In fact it’s quite likely that our nation’s credit binge was at least partially fueled by people using credit to make up for lost income. It could probably also be said that a % of the people who lost their jobs have opportunities to perform a similar function in a different industry, so not everyone who suffered a permanent job loss is left without the option to get a similar job.

All that being said this time around the cuts are even more severe, this recession could very well get worse before it gets better, and many of the workers who lost their jobs in the retail, automotive and manufacturing sectors may find themselves left with few options as far as getting similar jobs. Furthermore you undoubtedly have some consumers who were victims of both recessions,  and may have lost their jobs soon after recovering from the last one.

Needless to say the usual saws around the need for worker retraining, job creation, industry expansion, etc, all apply here, and the stakes are higher than ever; hopefully we’ll see more progress than talk this time around.

You can read more here.

Source:

The NY Times: “Job Losses Are Scarier Now” — Floyd Norris, February 9, 2009 .

Disclosure: at the time of publishing the author didn’t own a position in any of the companies mentioned in this article; the ideas expressed are solely the opinions of the author and shouldn’t be viewed as financial or investment advice.

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