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October 12, 2009

Labor Market Declines Persist

In a country of more than 300 million souls getting quick answers on how many folks are working at any given time is a difficult task. On top of that, the definitions of employment make a full understanding of the matter a bit slippery.

As of the end of September of this year the Bureau of Labor Statistics reports a bit more than 154 million Americans were in the labor force. These numbers are derived from household surveys. Of those in the labor force, more than 15 million were unemployed. This ratio gives us the unemployment rate. But there’s more to the story.

Despite population increases, the size of the U.S. labor force is decreasing. Part of this may be demographic – with older workers opting to retire as the baby boom ages. However part of this is what is called ‘discouraged workers’ or those folks who’ve given up on finding employment. Not surprisingly, many of these folks are still working, but at jobs that are not reported to the Bureau of Labor Statistics. The best estimate I have seen of this ‘shadow economy’ suggests that more than ten percent of the economy is attributable to under the table work. Most of the money made in this economy is through illegal activities like the sale of drugs, but most of the workers are in legal activities that simply aren’t reported. These are nannies, babysitters, and the guy who delivers those two cords of wood for winter.

The underlying dynamics of labor markets is also ripe for confusion. In a normal three month period as many as one in eight jobs changes hands. The vastness of job turnover far exceeds the actual number of unemployed over any given period. So, the problem isn’t necessarily a big spike in job losses, but in much lower job creation numbers. At the beginning of this recession half of all unemployed workers were back on the job in a little over seven weeks. Today, it takes more than 17 weeks before half of all newly unemployed workers find a job. It is unsurprising that many of these new jobs are lower paying than previous jobs, but it is far too early to tell if that will be a persistent result of this recession.

This recession has been especially tough on manufacturing and other industries that have tended to employ a far greater proportion of men. Health care and government, two industries that employ a larger share of women, have suffered much smaller job losses. Again, it is too early to judge the long term effect of this shift.

By far the most startling statistics are those of unemployment by educational attainment. For college graduates the unemployment rate is 4.9 percent, up from 2.6 percent a year ago. The rate steadily rises as educational attainment declines. Those without high school degrees suffer a 15 percent unemployment rate, with 30 percent fewer working in the formal labor market.

The recession is over, but labor markets will be the last to know.

Link to this commentary: https://commentaries.cberdata.org/43/labor-market-declines-persist

Tags: jobs and employment, recession


About the Author

Michael Hicks cberdirector@bsu.edu

Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University. Note: The views expressed here are solely those of the author, and do not represent those of funders, associations, any entity of Ball State University, or its governing body.

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