This recession has hit men harder than it has hit women. However, over the past year, things seem to be "evening out" between the genders. In February, the unemployment rate for adult men (over 20) fell to 8.7% from 8.8% in January and from 9.9% as recently as November. It is down from 10.0% a year ago. A bit of the decline is an illusion though as the participation rate for men fell from 74.1% a year ago to 73.4% in February. That is up from 73.2% in January. Thus the improvement in the job situation for men is even better than the 0.1% decline would indicate. The employment rate for men rose to 67.1% from 66.8% in January, and from 66.6% a year ago. Thus the employment situation for adult men has improved relative to both last month and a year ago. However, the year-over-year improvement is less than the drop in the unemployment rate would suggest.
For women, the unemployment rate rose to 8.0% in February, up from 7.9% in January and unchanged from a year ago. The participation rate was 60.0%, unchanged from January but down from 60.6% a year ago. The employment rate dipped to 55.2% from 55.3% in January and 55.8% a year ago. Thus even though the unemployment rate for women is the same as it was a year ago, the actual employment situation is a bit worse than it was a year ago.
In the overall big picture, men have fared far worse than women in this downturn. There are two possible reasons for that. The first is that the industries that have been particularly hard hit in this downturn tend to be far more male dominated than the industries that have skated though this recession more or less unscathed. The most glaring example of this would be the construction industry versus the health care industry (more on the industry breakdowns below).
The second explanation is that on average, women tend to still be paid far less than men, and employers might be more prone to let their relatively high priced male employees go first before their cheaper female employees. The industry effect is probably the bigger one, but the two are not mutually exclusive and both might be playing a role. The more recent weaker performance for women might also have to do with the industry mix. Women dominate teaching, particularly at the elementary school level. As we have seen in Wisconsin, teachers are on the firing line right now.
Teens, regardless of gender, have had a very hard time of it in this recession. Just go to a McDonalds (MCD) and you will see this for yourself. Normally the blemishes you see on the cashier’s face is acne, not wrinkles as is the case now. We saw a bit of improvement in February as the teen unemployment rate fell to 23.9% from 25.7% in January, and is down from 25.0% a year ago. The improvement, both from last month and from a year ago, is mostly an illusion.
The improvement is due to a falling participation rate, which dropped to 33.5% from 34.6% in January, and 35.1% a year ago. The percentage of teens that actually have a job was just 25.5%, down from 25.7% in January and 26.3% a year ago. While, for the most part, the earnings from teen jobs tend to go towards clothes from Abercrombie & Fitch (ANF) and other teen clothing stores, for many it is a significant part of paying for college. Also, when teens work they learn important job skills, such as the importance of actually showing up and doing so on time. The extremely low levels of teens working is not a good sign for the future.
Not surprisingly, Whites have a lower unemployment rate that do Blacks or Hispanics. But this month, the disadvantaged ethnic groups saw the unemployment rate fall, while there was no change in the White unemployment rate. The unemployment rate for Whites was unchanged at 8.0% after dropping from 8.5% in December and from 8.9% in November. It is down from 8.8% a year ago. The participation rate was unchanged at 64.5% from January, though it is down from 60.6% a year ago. The employment rate for whites rose to 59.4% from 59.3% in January but is down from the year ago level of 59.5%. It thus is likely that the real employment situation for whites improved a little bit in February, but in a 'rounding error' sort of way.
The unemployment rate for Blacks fell to 15.3% from 16.7% in January and 15.8% a year ago. Here though, the change in the headline unemployment numbers from a year ago are a bit exaggerated due to changes in the participation rate. For the month, the participation rate for Blacks was unchanged at 61.7%, so the monthly improvement looks to be real. A year ago the participation rate was 62.2%. The employment rate for Blacks rose to 52.2% from 52.0% in January, but is down from 52.4% a year ago. The unemployment rate is 91.3% higher than for whites, and the employment rate is 12.1% lower (52.2% vs. 59.4%). The participation rate is just 4.3% lower. A year ago the participation rate was 4.6% lower and the employment rate was 11.9% lower. A year ago the unemployment rate for Blacks was 79.5% higher than the White unemployment rate.
For Hispanics, the unemployment rate in February fell to 11.6% from 11.9% in January and down from 12.3% last year. The monthly improvement is mostly an illusion as the participation rate fell to 66.1% from 67.1% in January, and below the 67.9% level last year. The employment rate fell to 58.4% from 59.1% in January. A year ago the Hispanic employment rate was 59.5%. The participation rate by Hispanics is actually 2.5% higher than for Whites, but a year ago it was 4.1% higher than for Whites. The employment rate is 1.7% lower, while a year ago it was the same as for Whites. Over the last year the unemployment rate has moved from being 39.8% higher than the White unemployment rate to 45.0% higher than for Whites.
Stay in School
The unemployment rate for high school dropouts fell to 13.9% in February from 14.2% in January. It is down from the year ago level of 15.5%. Again, the monthly improvement is actually better than it appears, but the year-over-year decline is partly an illusion. The participation rate amongst the drop outs rose to 45.5% from 44.1% in January but is down from the 46.4% level of a year ago. The percentage of high school drop outs actually employed rose to 39.2% from 38.7% in January but is unchanged from last year. I should note here that the numbers by level of education refer to people over age 24, and so are not directly comparable to some of the other numbers. The overall unemployment rate for people over 24 years old was 7.6% in February, unchanged from January and down from 8.3% a year ago.
Just finishing high school or getting your GED substantially increases your odds of having a job. The unemployment rate for high school grads (with no college) ticked up to 9.5% from 9.4% last month. It is down from the 10.5% rate a year ago. In all three months, the level was far below that for drop outs. This month the unemployment rate for dropouts was 46.3% higher than for those who at least finished high school. The participation rate for high school grads was unchanged for the month. Year-over-year, it fell to 60.3% from 61.7%. Thus, the improvement from last year is somewhat of an illusion. The employment rate for high school grads was also unchanged on the month at 54.6% but is down from 55.2% a year ago. With the employment rate and the participation rate both unchanged on the month, the tick up in the unemployment rate for high school grads falls into the rounding camp, only this time the rounding made things look worse, not better.
Those that went to college but did not finish, or only got an Associates degree, had an unemployment rate of 7.8%, down from 8.0% in January and down from 7.9% a year ago. The improvement here is actually an illusion, and the real job situation for the community college grad crowd actually got worse, not better as the drop in the unemployment rate suggests. The participation rate for Associate Degree holders fell to 69.5% from 70.2% in January and is down from 70.3% a year ago. The employment rate fell to 64.1% from 64.6% in January and is down from the 64.7% level of a year ago.
For those who stay in school to get their BA (or higher), the unemployment rate rose to 4.3% from 4.2% in January, and is down a tick from 4.9% a year ago. Unlike the junior college crew, the real job situation is actually better than last month, not worse as the uptick in the unemployment rate would suggest. The participation rate rose to 76.9% from 76.4% in January and is unchanged from a year ago. The percentage of college grads with jobs rose to 73.6% from 73.2% in January and is above the 73.2% level from a year ago.
The unemployment rate for people 20-24 (those who are just entering the full time workforce) was 15.4%, up from 15.2% in January and down from 15.9% a year ago. If these people can not get jobs, they tend to remain living with Mom and Dad. This slows the rate of household formation, and hence the demand for housing. That makes it difficult for the economy to absorb the huge housing inventory overhang. Normally housing is the locomotive that pulls the economy out of recessions. That locomotive is still derailed, and it is the principal reason that this recovery has been so sluggish. The improvement in the unemployment rate for these folks is good news, but the level is still extremely problematic. The unemployment rate for those a bit older, the 25 to 34 year olds, which is the prime age for first time home ownership, rose to 9.4% from 9.3% last month but down from 9.8% a year ago. Lowering the unemployment rate amongst these people will be a key to resolving the housing problem.
Where the Jobs Are and Are Not
The private sector actually added more than the total number of jobs again this month. State and local governments laid off 30,000 workers, and have trimmed their payrolls by 241,000 over the last year. Actually it is mostly at the local government level where the declines are occurring. Local government employment was down by 18,000 on the month, and is down by 225,000 from a year ago. The number of state employees was down by 12,000 on the month and is actually down by 16,000 over the last year.
In looking at the effectiveness of the stimulus program from the Federal government, one should keep in mind the massive anti-stimulus effect of budget cuts and tax increases (mostly budget cuts) at the state and local levels of government. Federal Government employment was unchanged for the month and is down by 16,000 over the past year. Within local government, education jobs were down by 11,700 for the month and are down by 119,300 over the last year. State level employment jobs (mostly professors at State Universities) fell by 5,000 for the month but are up 29,500 from a year ago. Given the huge disparity in the unemployment rate between the uneducated and the highly educated that I discussed above, one has to seriously question the wisdom of laying off so many K-12 teachers.
The private sector added 222,000 jobs, a huge improvement from an addition of 63,000 jobs in January. The January total was also revised higher from an original reported gain of 50,000. The improvement was also better than that of December, when 167,000 private sector jobs were added. The December number was revised up for the second time. In January it was reported as a gain of 139,000, and the original figure was just 113,000. It seems likely that the January number was artificially depressed by the awful weather. Thus it was not really as bad as it looked, but conversely, February is probably not quite as strong as it appears. The average of the two months of 145,000 is probably a better representation of the real underlying growth rate of private sector jobs. That's good, but hardly great, especially coming out of a deep recession.
The February number was nicely above the consensus expectations of 198,000 jobs gained, unlike the previous two numbers, which came in far below the consensus expectations, although have subsequently been revised much closer to what forecasters were looking for at the time. The upward revisions to previous months have been happening regularly for several months now. That makes it likely that when the March jobs report comes out, the February numbers will also be revised higher. I would not be surprised if the January numbers are also revised up again next month as well.
This is the 15th straight month that the private sector has added jobs, with a total increase of 1.526 million over the last year. In a normal year, that would be a great showing, but we lost over 8 million jobs in the great recession, so we still have our work cut out for us.
Within the private sector, the goods producing sector gained 70,000 jobs, on top of a gain of 35,000 in January (revised up from 18,000). Over the last year, employment in the goods producing sector are up 235,000. The construction industry gained 33,000 jobs, more than reversing a 22,000 drop last month. Since construction takes place outdoors, it is one area where the weather effects are most apparent. I would not read the 33,000 gain this month as a sign that the construction industry is coming back in a big way. Averaging out the two months to get average gains of 5,500 is much closer to reality, and relative to recent trends, highly encouraging. The construction industry has been particularly hard hit in this downturn, accounting for about 25% of all the jobs lost, even though at the start of the recession it accounted for less than 6% of the total jobs in the country.
As these jobs generally do not require a lot of formal education, the demolition of construction helps explain why the unemployment situation is so dire for those who never went to college. As a male dominated industry, it also helps explain why this recession has been so much tougher on men than it has been on women. Employment in Construction peaked before the rest of the economy, in April 2006. Since then we have lost 2.217 million construction jobs. Most of the decline though happened after the overall private sector jobs peaked in December 2007, and since then Construction jobs are down by 1.978 million, or 26.4%. Since the peak, overall private sector employment is down by 7.308 million. In other words, this one industry is directly responsible for 27% of all job losses since the end of 2007, even though it was responsible for just 6.47% of all private sector jobs in December 2007.
Manufacturing gained 33,000 jobs, on top of 53,000 gained in January. Manufacturing employment has been in a secular decline for about 30 years, but it has actually fared pretty well over the last year or so. The peak in manufacturing jobs was way back in July of 1979 at 19.531 million. By the time the Great Recession started in December 2007, the number of manufacturing jobs was already down to 13.740 million. The low in manufacturing jobs was in December 2009 at 11.456 million, and since then we have gained back 195,000 of those jobs. Still, relative to the start of the Great Recession manufacturing jobs are down by 2.089 million, representing 28.6% of all job losses from the peak.
The service sector gained 152,000 jobs in the month, up from an increase of just 33,000 in November (revised from a gain of 32,000) but down from a gain of 163,000 in October (revised from 146,000). Relative to a year ago, private service sector jobs are up by 1.291 million, but are still off by 3.403 million from the start of the Great Recession. One of the biggest contributors to service sector jobs, as always, was the health care industry, which added 36,200 jobs. The health care industry has not had a single down month in terms of employment in the entire downturn. The health care industry has a far higher proportion of women working in it than does the economy as a whole, and this is a big part of the reason that the unemployment rate for women is so much lower than that for men.
Of particular interest is the increase in temporary workers. Those jobs increased by 15,500 in February, more than reversing a 4,900 decline in January (revised from a decline of 11,400). It is not that being a temp is the greatest or highest paying job in the world that makes them of particular interest. It is because they are a good leading indicator of future employment trends. When during a downturn an employer first sees a pick up in demand, he will not know if it is just a temporary blip, or the start of a real recovery. Thus he is going to be hesitant to take the time and expense of bringing on new workers who will just have to be laid off it if does turn out to be just a blip. The first thing she is going to do is work the existing workforce harder.
The second thing an employer will do when faced with an increase in demand is going to be to call a temp agency. Only when the employer is reasonably sure that the upturn is for real and will last will he figure that it is worth bringing on a full time permanent employee. However, temp jobs have been trending higher since August 2009, and one would think that we would be starting to see those translating into permanent jobs at a faster rate at this point. That disconnect could be pointing to some sort of structural shift in the employment market, but it is too early to say. Since 8/09 the number of Temps is up by 472,400 or 27.1%, but is still 13.0% below the level at the start of the Great Recession.
The number of people working part time for economic reasons, in other words because that is all they could find, fell to 8.340 million, down 67,000 from January and down 453,000 from a year ago. That is also a good sign. It can be seen in the decline of the "underemployment rate" (U-6 for you wonks out there), which fell to 15.9% from 16.1% in January and down from 16.8% a year ago. That is still a very high rate. After all, if you are used to working 40 hours a week, but have been cut back to just 20 hours a week, you might not be unemployed, but economically you are still struggling. It is not that part time jobs are going away. The number of people who were working part time because that is what they want to do increased by 291,000 for the month, but is still down 106,000 from a year ago.
Lots of Crosscurrents
Overall, this was a very solid report. Good but not great, especially considering that it included a bit of weather related bounce from the blizzard afflicted January. The internals of the report were OK. The unemployment rate coming down was a positive surprise, especially after the incredible drop in the previous two months. The significance is more from confirming that those declines were mostly for real, rather than the 0.1 decline for the month. Since both the employment rate and participation rates were unchanged for the month, logically there should have been no change in it, so it is most likely a positive rounding error, and nothing to get excited about. The job creation pace was a bit higher than expected, particularly on the private sector side. The cuts in government employment were actually a bit more than the consensus was looking for.
The pace of job creation we are seeing is not going to be enough to put a dent in the huge numbers of people who are without work and want it. Yes, the pace of job creation in this recovery is much better than it was coming out of the last recession, but that is pretty cold comfort for those who are being forced into abject poverty because they can't find work despite months and months of pounding the pavement (or the keyboard as is more likely these days). Officially we are now 20 months into an economic recovery, and the economy has added a total of 362,000 private sector jobs since then. At the same point after the 2001 recession was over, the economy had actually lost an additional 1.344 million jobs. Most of those people are really not going to be all that interested in how the pace of this recovery compares to the pace of the recovery following the 2001 downturn, they just want a job that can support their family. However, the point is that it is not unusual for the pace of job creation to be slow even after the recession has been over for a while.
The damage done by this downturn was far deeper and more extensive than in those downturns. The graph below, from (http://www.calculatedriskblog.com/), shows just how deep and nasty this downturn was relative to all the post war recessions that came before it. By this long after the previous peak in employment, in every case but one, (2001) the economy had fully recovered and had more total jobs than when the recession started. While clearly we have started the upturn, with or without census hiring, it is going to take a very long time before we surpass the total number of jobs the economy had back in December of 2007. At the January pace, it would take 33 more months from here, that’s three years from now to get back to the 12/2007 peak in private sector employment.
The fiscal stimulus, as helpful as it has been in preventing a much deeper downturn and giving us the start of a recovery, is starting to wear off. While high unemployment seems to be a great political talking point, it really seems like no one in Washington really gives a damn anymore. There certainly seems to be no appetite to actually do anything about it. The GOP got the House based on misguided demands that we immediately try to balance the budget. In the process we are likely to repeat the mistake that FDR did in 1937 when he prematurely cut back on the New Deal stimulus. This pushed the economy back down, and it only revived when a much bigger stimulus, known as WWII, came along.
We will not get much progress on the deficit either. The cuts, in slowing the economy, will result in lower tax collections than we would have gotten. The sincerity of those who pushed for a continuation of the top end of the Bush Tax cuts in actually wanting to reduce the deficit has to be in question. That "stimulus" going to the top 2% is not likely to be very effective in creating many jobs. Just how many Maids and Chauffeurs do the plutocrats really need, and how many are they going to hire on the margin? Also the composition of the $61 billion in spending cuts recently passed by the House for the second half of the 2011 fiscal year also raise questions about the sincerity of the desire to actually cut the deficit. Included in the cuts is a $603 million drop in funding for the IRS (5% of full year 2010 levels). The GOP often says that government should be run the way corporations are. If a company is having cash flow problems, is the first place you go to cut spending your accounts receivable department?
The stimulus spending at the Federal level was substantially offset by anti stimulus for the state and local levels. That anti-stimulus is continuing. This can clearly be seen in the reduction in State and especially local government employment. Over the last year, government employment is down by 257,000 or 1.41% while private sector employment is up by 1.526 million, or 1.43%. It is positively Orwellian to suggest that you want to reduce unemployment by laying people off. As those people are laid off, they have less money to spend, and that slows overall demand and results in job losses (or slower job gains) in the private sector as well. Most localities really don't have a choice but to lay people off as salaries are usually the biggest part of their budgets, and they can not run operating deficits. A big part of the ARRA was actually aid to states and localities to prevent these sorts of lay offs from happening, but now that funding is running out. If not for the ARRA the cuts we are seeing now would have happened earlier.
Lower aggregate demand is going to hurt, not help, business confidence. The final graph shows the year over year percentage change in Private and Government employment over the last 20 years. The big spike in government employment almost a year ago and in 2000 is due to temporary census hiring. Note that there has been no secular trend towards government employment growing more quickly than that of private employment. One of the arguments about the relative level of private versus public sector pay has been that public sector employees should be paid less because they have greater job security. While it is true that government employment does not fall as much during recessions, given the experience over the last year, one has to ask: what job security for public sector employees? Note that in the 2001 recession, the overall drop in employment was much more greatly cushioned by increasing government employment than has been the case in the Great Recession.
Recently the biggest single infrastructure project in the country, a desperately needed second railroad tunnel under the Hudson River was cancelled because the Governor of New Jersey did not want to put up one third of the cost. That project would have created thousands of new jobs, and jobs that would go to the very hard hit construction industry. It would have had a very high social return on investment by easing traffic congestion going into New York City and made life easier for all the New Jersey residents who commute into the city.
While it is true that you don't want to cut taxes in a recession or in an incipient recovery, it is equally true that you don't want to cut government spending. Tax increases and spending cuts are both forms of fiscal contraction. Not all tax cuts or spending are equal in terms of stimulating the economy and creating jobs. The cut in the payroll tax is likely to be quite effective in stimulating the economy since it will result in higher take home pay to people who are likely to spend it quickly. Cuts in spending on overseas adventures in Iraq and Afghanistan would not do much damage to domestic employment but the spending there is not primarily about domestic employment. Cuts in social safety net spending, which is apparently high on the agenda of those pushing to cut spending right away, is likely to be a major drag on the economy and job creation.
Recently, Mark Zandi, of Moody’s Economics and a top economic advisor to the McCain Campaign, estimated that the House Budget cuts, if enacted, would result in 700,000 fewer jobs created in 2011 and 2012 (total). While that might be a bit on the high side, it is without a doubt well in the six figures. While clearly we need to address the long term structural deficit, slashing away right now on spending is deeply misguided. It will not bring in anything near the advertised reduction in the deficit. They will cause enormous pain amongst the most vulnerable people in our society.
We still have 13.673 million unemployed. Getting them back to work should be our first priority. As they get jobs, they will have income, and thus start to pay income taxes again. That in itself would help bring the deficit back down. After all, a big part of the deficit problem, particularly in the short term, is that tax revenues are depressed by the weak economy. Federal tax collections are, as a share of GDP, near their lowest point in 60 years. That is also true of State and Local tax collections, and if anything more so. If anything, we should be increasing domestic spending right now to help bring down the unemployment rate more quickly, not cutting spending. That’s not to say that every penny currently being spent is sacred. There is plenty of overlap in many government programs. Cutting the duplication is fine, but that money should be channeled into the most effective programs, not simply cut.
Huge spending cuts to domestic programs will slow the economy, but it seems to have gathered enough momentum that we are not likely to fall into a double dip recession. Still the cuts are likely to keep us in the purgatory of a pseudo-recovery, one where the economy is growing but not producing a lot of jobs, much longer than needs to be the case. But hey, the 2012 elections are coming up, so from the GOP perspective, perhaps that is a feature, not a bug.
How We Rate Credit Cards
At GET.com we compare credit cards and rate them objectively based on the credit card's features, interest rates and fees.
Cards are rated by our team based primarily on the basis of value for money to the cardholder. The GET.com team rates each card based on its annual fee, rewards, benefits, bonus, introductory APR, ongoing APR, flexibility (in how its benefits can be used and how rewards are earned and redeemed), and other card features.