Unemployment Hits 8.9% In The US

The April jobs report came in somewhat better than expected with a loss of “only” 539,000 jobs. Due to growth in the labor force, the total number of people who are unemployed rose by 563,000.

This good news was offset by upward revisions to the February and March lost jobs figures, totaling 66,000. The unemployment rate rose to 8.9% from 8.5% in March (U-3).

There was mixed news in the details of the report. On the plus side, the broader U-6 measure of unemployment, which includes discouraged workers and those working part time for economic reasons, only rose to 15.8% from 15.6% in March. This was a much smaller rise that we saw in either of the last two months (February, up 0.9 points, March up 0.8 points).

Other things were not as comforting. The biggest area of job gains was in the Federal Government, mostly due to hiring for the upcoming census. Private sector employment was down by 611,000.

As I pointed out in a previous blog, the amount of time people are out of work is lengthening. The number of people out of work for more than 27 weeks rose by 498,000, or by 88% of the total increase in unemployment.

The consequences of being out of work for more than six month are substantially different than for being out of work for a few weeks. Since the start of the recession in December 2007, the number of long term unemployed has almost tripled to 3.7 million. Currently, the long-term unemployed make up 27.2% of the total unemployed, an all-time record (or at least since the data became available) up from 17.9% of the unemployed a year ago. In contrast, those out of work for 14 weeks or less now make up just 54.1% of the jobless, down from 65.4% a year ago.

Once again, the losses were widespread throughout the economy. The goods producing sector shed 270,000 jobs, or which 110,000 were in Construction and 149,000 were in Manufacturing. Relative to the average for the fourth quarter of 2008, the total number of goods producing jobs is off by 7.5%.

The service sector lost 269,000 jobs including 47,000 in Retail, 122,000 in business and professional Services, and Leisure and hospitality down by 44,000 jobs. Those losses were partially offset by gains of 15,000 in Education and Health, and by 72,000 Government jobs. The service sector is, of course, much larger than the goods-producing sector. Relative to the average of the fourth quarter of last year, total employment in the sector is down 1.5%.

Demographically there have been wide disparities in how hard different groups have been hit in this downturn. Most notably, men are taking it on the chin (partly because they are much more likely to be employed in the goods-producing jobs than are women). The unemployment rate for adult men now stands at 9.4%, up from 8.8% in March and 8.1% in February. A year ago, the unemployment rate for men was just 4.7%.

Women on the other hand are holding on to their jobs (relatively speaking) with an unemployment rate of 7.1%, up from 7.0% in March and 6.7% in February. A year ago the unemployment rate for women was 4.3%. As is usually the case in recessions, Teenagers, Blacks and Hispanics have be hit harder than adult Whites.

For Teens, however, the unemployment rate is leveling off at a very high level. In April, it was 21.5%, up from 15.4% a year ago, but actually down slightly from February (21.6%) and March (21.7%). For Blacks, the unemployment rate rose to 15.0% from 13.3% in March and 8.8% a year ago. For Black Men, the rate is now 17.4%. For Hispanics, the unemployment rate dipped slightly to 11.3% in April from 11.4% in March, but is up from 7.0% a year ago.

While there are some tentative signs that the rate of decline in the labor market is slowing, most notably the drop in initial claims, I still remain worried that this progress could be erased if General Motors (GM) goes bankrupt. This will cause many of its suppliers major headaches, like Lear (LEA) and TRW Automotive (TRW), causing major additional layoffs at those firms. Still, there are reasons for cautious optimism in this jobs report.

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