February 1, 2008 (Jobs Byte)
Economy Sheds Jobs, Unemployment Stable
"For the first time since data has been kept, manufacturing is less than 10 percent of employment."
The establishment survey showed the economy losing 17,000 jobs in January, the first reported job decline since August of 2003. Over the last three months, the economy has added a total of 125,000 jobs, with the private sector adding just 99,000 jobs. The household survey showed little change in the unemployment rate, although it rounded down to 4.9 percent for January compared to 5.0 percent in December.
The job loss in the establishment survey was driven by losses of 28,000 jobs in manufacturing, 27,000 jobs in construction and 26,000 state government education jobs. The latter is likely due to a faulty seasonal adjustment and will probably be reversed in future months, but the declining employment in construction and manufacturing is very real.
Residential construction has lost 189,300 jobs since July, 5.8 percent of employment in the sector. Employment in the non-residential sector has also been drifting downward in the last three months, indicating that the boom in this sector is over.
The loss of manufacturing jobs continues the downward trend of the last decade. Manufacturing employment has fallen by 3,880,000 jobs, or 22.0 percent, since January of 1998. It lost 279,000 jobs in the last year. The newly revised data show that employment in manufacturing fell below 10.0 percent of total employment in October. The loss of jobs has hit every sector of manufacturing, although the auto sector has been especially hard hit, losing 57,400 jobs or 5.6 percent of employment in the last year. The loss of 18,300 jobs in textile mills and 20,300 in apparel (10.1 and 9.1 percent of employment, respectively) also stand out.
There were few sectors showing notable job gains in January. The two exceptions were health care and restaurants. The health care sector added 27,100 jobs, while the restaurant sector added 14,800 jobs. Over the last three months, these two sectors together have added 130,100 jobs, an amount equal to 131.4 percent of the job growth in the private sector as a whole.
The data in the household survey largely reinforce the picture of a weak labor market. There was little change in unemployment rates for most demographic groups, although the January data indicate that a reported jump in December in the unemployment rate for black teens was not a fluke. The January data show a black teen unemployment rate of 35.7 percent. This is up from a 27.9 percent rate reported for October.
The number of people involuntarily working part-time rose again, hitting the highest level since October of 2004. The average and median duration of employment spells both increased, as did the percentage of the long-term unemployed. The number of discouraged workers also showed a year over year increase, continuing the recent pattern.
By age, employment growth continues to be heavily skewed toward older workers, with people over age 65 showing an employment gain of 287,000 jobs, while employment dropped by 250,000 for other age groups. The change in population weights complicates this comparison, but over the last year, employment among people over age 65 grew by 1,409,000, while falling by 1,076,000 for younger workers.
This employment report should be sufficient to remove any doubt that the economy is in very serious trouble and most likely has already entered a downturn. In addition to the loss of jobs, there was also a reported decline of 0.1 hours in the average workweek, leading to a decline of 0.3 in the index of aggregate weekly hours. The decline in hours worked, which showed up most clearly in non-durable manufacturing, suggest that more layoffs are on the way. In addition, wage growth has slowed to crawl, averaging just 2.3 percent over the last quarter. This is well below the rate of inflation.
It is also important to remember that the birth/death imputation is likely overstating the number of jobs created in new firms. The revision for last year lowered total employment by 376,000 or 31,000 per month. It is likely that the current data will be revised downward by a comparable amount. In short, the picture is probably even worse than the data now show.
Dean Baker is the Co-director of the Center for Economic and Policy Research.
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