Jobs Byte - 06/01/01 by Dean Baker Unemployment Edges Down as Job Loss Continues __________________________________________________ _ The decline in jobs and hours in the manufacturing sector, shows that it still has not hit bottom. __________________________________________________ _ The May employment report showed the unemployment rate edging down to 4.4 percent in May, from 4.5 percent in April. This was all attributable to decline in the percentage of the population counted in the labor force, as the number of people counted as employed fell by 251,000. At the same time, the establishment survey showed a loss of 19,000 jobs. The picture in the household survey continues to be that of a labor market that is weakening, but at a moderate pace. The decline in the number of people reported as being in the labor market is consistent with a decreased availability of jobs. Interestingly, the decline in labor force participation appeared to be concentrated among Hispanics, who saw a drop in the labor force participation rate of 0.9 percentage point from 68.7 to 67.8 percent. While both the Hispanic and overall numbers for labor force participation can be somewhat erratic, it is clear that there is no real growth in these numbers at present, even if the reported declines are statistical aberrations. Other data in the household survey was mixed. On the negative side, there was an increase of 136,000 in the number of people working part-time and a rise in the median duration of unemployment spell. On the positive side there was an increase in the percentage of unemployment attributable to people who voluntarily quit their jobs(a sign of confidence in the labor market), and a decline in average duration of unemployment. Also, black teen unemployment was reported as falling by 6.5 percentage points to 25.1 percent. This is probably an anomaly that will be reversed next month, but if not, it would be surprisingly good news. The establishment survey continues to show a very weak labor market as the economy lost jobs for the second straight month. (A 53,000 decline in jobs previously reported for March has been revised to a gain of 59,000.) The biggest source of job loss continues to be manufacturing, with jobs in the sector falling by 124,000. This follows a drop of 113,000 in April (revised downward from an originally reported drop of 104,000). Hours worked in manufacturing is falling even more rapidly, with the index dropping 1.5 percent in May. This index now stands at 99.1, compared to 1982 base of 100. The decline in jobs and hours is widely spread across manufacturing, but the electronics sector is being hardest hit at present. Hours worked in this sector fell 3.4 percent last month and are now down 8.0 percent from their January level. There were few areas showing significant job growth in May. The huge personal and business services sector added 42,000 jobs in May, but that followed a decline of 78,000 jobs in April. Job growth for the last three months in this sector has averaged just 6,000. By comparison, it added an average of more than 110,000 a month in the first half of 2000. The employment diffusion indexes -- which give the percentage of industries which intend to add workers -- are at levels consistent with a recession. The 3 month manufacturing index is at 25.7 and the 3 month overall index is at 47.9. Both are levels not seen since the last recession. Wage growth continues at the same pace as in the past. The annual rate of wage growth over the last quarter has been 4.3 percent, exactly the same as the rate of wage growth over the last year. The annual benchmark revision to the establishment data once again significantly raised the number of jobs reported in this survey, adding 445,000 to the level reported for April. The gap between the job growth reported in the establishment survey and the employment growth reported in household survey since 1990, now stands at 6,740,000 jobs. On the whole, the May data continue to show a picture of a weakening economy. By far the worst news is in the manufacturing sector, which still does not appear to have hit bottom. But equally important is the fact that there is very little strength elsewhere to offset this weakness. By Dean Baker The CEPR Jobs Byte is published every month upon release of the Bureau of Labor Statistics employment report. For more information or to subscribe by fax or email, contact CEPR at 202-293-5380, ext 208 or email [EMAIL PROTECTED]
