Jobs Byte By Dean Baker September 7, 2001 Unemployment Jumps, as the Economy Sheds More Jobs __________________________________________________ _ Over the last three months, the private sector has lost 349,000 jobs. __________________________________________________ _ The unemployment report jumped 0.4 percentage points in August to 4.9 percent, the highest level since September of 1997. At the same time, the establishment survey showed the economy losing 113,000 jobs in the month. The jobs situation looks even worse when the focus is placed on the private sector. It lost 110,000 jobs in August, and the loss for July was revised upward to 82,000, from 71,000 previously reported. Over the last three months, the private sector has lost 349,000 jobs. Manufacturing continues to bear the brunt of the job loss, with a drop of 141,000 jobs in August and total job loss of 324,000 over the last three months. Manufacturing employment is now down by more than 1 million from its level of July 2000, a drop of 5.4 percent. The recent job declines have been concentrated in durable goods, which has lost 246,000 jobs in the last three months. Within this category, industrial machinery and electronic equipment stand out as the hardest hit industries in the last three months, shedding 3.6 and 5.1 percent of their workforces, respectively. This job loss is certainly consistent with the widely reported collapse in the tech sector. While manufacturing has been hardest hit by the downturn, most other sectors are also losing jobs. Transportation, wholesale trade, and retail trade all reported job losses in August, with finance and construction showing modest gains. The personal and business services sector added 72,000 jobs after losing 34,000 jobs in July. Monthly job growth in this sector had averaged over 100,000 in the period from 1996 to 2000. Health services accounted for much of the job growth in this sector, adding 32,000 jobs. Jobs in health services are growing rapidly, rising by 88,000 in the last three months. This might be due to the fact that many low paying jobs in these sectors had been going unfilled, when the economy was stronger. Wage growth is continuing at a moderate 4.0 percent annual pace over the last quarter. However, with falling employment levels, this will not be sufficient to keep the real income of workers from falling. Most of the news in the household survey was negative. The unemployment rate rose for almost all demographic groups. The unemployment rate for teenagers rose by 1 percentage point to 14.4 percent. For blacks it rose by 1.2 percentage points to 9.1 percent. The unemployment rate for black teens jumped by 4.9 percentage points to 30.4 percent. By education group, those without high school degrees were hardest hit, seeing a 0.7 percentage point rise in their unemployment rate to 7.3 percent. There was also a sharp jump in the number of people who reported that they were not looking for work because they were discouraged over their job prospects, with 335,000 in this category last month, compared to 205,000 in August of 2000. On the brighter side, the percentage of unemployment attributable to workers who voluntarily quit their jobs actually rose slightly and the number of people involuntarily working part-time fell for the second straight month, but there can be little doubt that this report gives an overwhelmingly negative picture of the labor market. The employment diffusion indexes, which show the percentage of industries who intend to add workers over various time horizons, provide little reason fro expecting the situation to improve soon. The overall three month index fell to 39.7 percent this month, its lowest reading since the last recession. The three month manufacturing index fell to 19.1 percent, which is the lowest measure for this index since the November of 1982. These indexes indicate that firms do not plan to resume hiring in the immediate future. This picture is especially dim given that the economy should have been receiving a temporary boost in August from the tax rebates that are being mailed out. After the last rebate checks are mailed out this month, there will be somewhat of a downward drag, as the economy loses this source of stimulus.
