March 7, 2008 (Jobs Byte)
by Dean Baker
"This report leaves little doubt that the economy is in a recession."
The private sector lost 101,000 jobs in February according to the establishment survey. This loss, combined with downward revisions to job growth for the prior two months, brings the 3-month decline in private sector employment to 141,000 jobs. Overall employment fell 63,000, the second consecutive monthly decline. Consecutive months of job loss have not occurred outside of periods associated with recessions. The unemployment rate edged down slightly to 4.8 percent, as 644,000 people were reported as leaving the workforce.
The job loss was broad-based but manufacturing and construction continue to be especially hard hit, losing 52,000 and 39,000 jobs, respectively. Job loss in manufacturing was concentrated in the durable goods sector, which lost 40,000 jobs. Auto manufacturing lost 12,900 jobs in February. It has lost 75,500 jobs, or 7.4 percent of total employment, over the last year.
The job loss in construction was heaviest in the residential sector, but all sectors of construction reported job loss. This is consistent with Census data showing that non-residential construction is now declining also. Jobs in residential construction are now down by 408,000, or 11.6 percent, from their peak in February 2006. With residential construction down by almost 30 percent over this period, clearly job loss is understated in the survey, presumably because many undocumented workers were never counted.
The retail sector also showed a substantial job loss, shedding 34,100 jobs. The sector has now lost 59,600 jobs over the past three months. Job loss has been especially steep in clothing stores, which have shed 29,500 jobs (1.9 percent of employment) since October. With consumers cutting back and clothes prices rising sharply, this decline is not surprising. In another ominous sign, the temporary help sector lost 27,600 jobs, bringing the three month loss in this sector to 43,800.
Health care and restaurants are the two sectors that continue to add jobs at rapid rates, gaining 37,000 and 19,000 jobs, respectively. Over the last three months, these sectors have added 137,100 jobs. This means that the private sector, excluding health care and restaurants, has shed 278,000 jobs over the last three months.
While the sharp drop in labor-force participation in February prevented the unemployment rate from rising, most of the other data in the household survey is consistent with a weakening labor market. Total employment in the household survey stands just 105,000 above its year ago level. While this weakness is partially due to a change in population controls, the overall employment to population ratio is down by 0.5 pp from February 2007.
The biggest declines in employment are for workers between the ages 35-44, who have seen their employment drop by 722,000 (2.1 percent) over the last year. In percentage terms, workers between the ages of 20-24 saw a drop in employment of 3.5 percent, and teenagers saw a decline in employment of 6.2 percent.
Other measures in the survey showing weakness are an increase in the number of discouraged workers, a reduction in the share of unemployment attributable to people voluntarily leaving their jobs, and an increase in the number of workers involuntarily working part-time. This number now stands at 4,790,000, the highest level since the question was redesigned in January of 1994. It is almost 1 million higher than the low for the cycle of 3,858,000, reached in April of 2006. The one piece of positive news in the survey is that the measures of unemployment duration all fell in February, although this is also consistent with the long-term unemployed dropping out of the labor market.
Wages grew at a 3.5 percent annual rate over the last quarter, down somewhat from their 3.7 percent rate for the last year. This is more than 3 percentage points below the 6.8 percent rate of inflation over the last quarter and 0.8 percentage points below the rate of inflation for the last year.
There can be little doubt from this employment report that the economy is now in a recession. It is now shedding jobs at a rapid rate, with the declines showing up in most sectors. In fact, job loss is probably understated because of the imputation for jobs in new firms.
Dean Baker is the Co-director of the Center for Economic and Policy Research. CEPR's Jobs Byte is published each 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. 102, or morgavan [at] cepr [dot] net.