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Sunday, April 06, 2008

The evidence for a recession grows stronger

I think the best way to deal with the Bureau of Labor Statistics report on the labor market situation in March is simply to reprint the BLS release, with some comments at the end:


The unemployment rate rose from 4.8 to 5.1 percent in March, and nonfarm payroll employment continued to trend down (-80,000), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Over the past 3 months, payroll employment has declined by 232,000. In March, employment continued to fall in construction, manufacturing, and employment services,while health care, food services, and mining added jobs. Average hourly earnings rose by 5 cents, or 0.3 percent, over the month.

Unemployment (Household Survey Data)
The number of unemployed persons increased by 434,000 to 7.8 million in March, and the unemployment rate rose by 0.3 percentage point to 5.1 per-cent. Since March 2007, the number of unemployed persons has increased by1.1 million, and the unemployment rate has risen by 0.7 percentage point.(See table A-1.)

Over the month, unemployment rates rose for adult men (to 4.6 percent), adult women (4.6 percent), and Hispanics (6.9 percent). The jobless rates edged up for blacks (to 9.0 percent) and whites (4.5 percent), while the rate for teenagers (15.8 percent) was essentially unchanged. The unemployment rate for Asians was 3.6 percent, not seasonally adjusted. (See tablesA-1, A-2, and A-3.)

In March, the number of persons unemployed because they lost jobs increasedby 300,000 to 4.2 million. Over the past 12 months, the number of unemployedjob losers has increased by 914,000. (See table A-8.)

Total Employment and the Labor Force (Household Survey Data)
The civilian labor force rose to 153.8 million over the month, offsetting a decline in the prior month. The labor force participation rate was 66.0 percent in March and has remained at or near that level since last spring. Total employment held at 146.0 million. The employment-population ratio was little changed over the month at 62.6 percent. The ratio was down from its most recent peak of 63.4 percent in December 2006. (See table A-1.)

The number of persons who worked part time for economic reasons, at 4.9 million in March, was little changed over the month, but has risen by 629,000 over the past12 months. This category includes persons who indicated that they were working part time because their hours had been cut back or because they were unable to find full-time jobs. (See table A-5.)

Persons Not in the Labor Force (Household Survey Data)
About 1.4 million persons (not seasonally adjusted) were marginally attached to the labor force in March. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Among the marginally attached, there were 401,000 discouraged workers in March, about the same as a year earlier. Discouraged workers are defined as persons not currently looking for work specifically because they believed no jobs were available for them. The other 951,000 persons classified as marginally attached to the labor force in March cited reasons such as school attendance or family responsibilities. (See table A-13.)

Industry Payroll Employment (Establishment Survey Data)
Total nonfarm payroll employment continued to trend down in March (-80,000), and has fallen by 232,000 over the past 3 months. In March, job losses occurred in con-struction, manufacturing, and employment services. Employment in health care, foodservices, and mining remained on an upward trend. (See table B-1.)

Employment in construction declined by 51,000 in March and has fallen by 394,000 since its peak in September 2006. Most of the March decrease in employment occurred among specialty trade contractors (-42,000), with both residential and nonresidential contractors contributing to the decline.

Manufacturing employment fell by 48,000 in March and by 310,000 over the past12 months. Employment in motor vehicles and parts was down by 24,000 over the month, largely reflecting the impact of a strike in auto parts manufacturing. The strike resulted in a parts shortage that led to plant shutdowns elsewhere in the auto industry. During the 12 months ending in February, the motor vehicle and parts industry lost an average of 6,000 jobs per month.

In March, factory employment also fell inseveral construction-related industries, including wood products (-5,000), nonmetallicmineral products (-5,000), and furniture and related products (-5,000). Plastics and rubber products and textile mills also lost jobs over the month. Professional and business services employment edged down in March (-35,000). The number of jobs in the employment services component declined by 42,000 over the month;about half of the decline occurred in the temporary help services industry. Employment services has lost 210,000 jobs since its most recent peak in August 2006. In March, employment in professional and technical services showed little change for the third month in a row. This industry had added an average of 27,000 jobs per month in 2007.

In March, employment in retail trade was little changed. Job losses continued inbuilding material and garden supply stores (-9,000), furniture and home furnishings stores (-5,000), and department stores (-5,000). Over the past 12 months, retail trade has lost 107,000 jobs. Employment in financial activities changed little in March. Credit intermediation employment edged down over the month and has fallen by 120,000 since its most recent peak in October 2006.

Health care employment continued to expand in March, rising by 23,000. Hospitals added 14,000 jobs. Over the past 12 months, health care has added 363,000 jobs. Social assistance employment edged up over the month (11,000).

In March, food services employment continued to trend upward (23,000). Employment in the industry has increased by 288,000 over the past 12 months. Employment in mining rose by 6,000 in March. Support activities for mining, particularly those related to oil and gas extraction, accounted for about two-thirds of the increase.

Weekly Hours (Establishment Survey Data)
In March, the average workweek for production and nonsupervisory workers on private nonfarm payrolls rose by 0.1 hour to 33.8 hours, seasonally adjusted. Both the manufacturing workweek, at 41.3 hours, and factory overtime, at 4.1 hours, rose by 0.1 hour over the month. (See table B-2.)

The index of aggregate weekly hours of production and nonsupervisory workers on non-farm payrolls rose by 0.2 percent in March to 107.5 (2002=100). The manufacturing indexwas unchanged at 93.4. (See table B-5.)

Hourly and Weekly Earnings (Establishment Survey Data)

In March, average hourly earnings of production and nonsupervisory workers on private nonfarm payrolls rose by 5 cents, or 0.3 percent, to $17.86, seasonally adjusted. This followed gains of 5 cents in January and 6 cents in February. Average weekly earnings rose by 0.6 percent in March to $603.67. Over the past 12 months, average hourly earnings increased by 3.6 percent and average weekly earnings rose by 3.3 per-cent. (See table B-3.)

Comments: The employment decline, measured by the establishment employment data, is nearly 1 million jobs over the past year, and is widespread. Construction (down by 700,000, or nearly 9%), manufacturing (down by about 400,000, or about 3%), and retail jobs (down by 320,000, about 2%) are well below March 2007 levels. Financial services has lost 140,000 jobs (1.6%).

Only employment in health care (+330,000, a little over 2%), and in government (+600,000, a little less than 3%, of which 2/3 is in local government--up a little over 3%) has shown anything like robust growth. Given the projected budget situation of state and local government, this rate of employment growth is unlikely to continue.

The increases in weekly earnings (+3.6%) and in hourly earnings (+3.3%) have both lagged the increases in consumer prices (+4.3%) over the past year. This is unsurprising. In weak labor markets, real wages are unlikely to rise.

Over the past year, the labor force participation rate has continued to fall (down 0.5 percentage points), as has the employment-population ratio (down 1 percentage point). And the (seasonally unadjusted) unemployment rate has increased from 4.4% in March 2007 to 5.2% in March 2008.

If the economy is not currently in a recession, it's doing a very good job of pretending.


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