Employment - A Historical Viewpoint

The March employment report was ugly, but everyone expected to be ugly and it more or less matched expectations.
 
For the month 663,000 jobs were shed, and the headline narrow definition of unemployment rose to 8.5%. Since the start of the recession, 5.1 million jobs have been lost, with the bulk of those (3.3 million) lost in the last 5 months. This brings the total number of unemployed up to 13.2 million. That is more than the entire population of Illinois.
 
The number of long-term unemployed rose to 3.2 million, an increase of 146% since the recession started in December of 2007. The unemployment rate would have been higher but for the fact that the labor force fell by 166,000 on the month.
 
The job losses are widespread, but seem to be hitting adult men particularly hard, their unemployment rate jumped to 8.8% from 8.1% in February and 7.6% in January. The rate for women was 7.0% in March, up from 6.7% in February and 6.2% in January.
 
Job losses were also widespread by economic sector, with every area but Education and Health Services hemorrhaging jobs, and that area only adding 8,000. The average work week also fell 0.1 to 33.2 hours, the low for this cycle. The number of people working part time because their hours have been cut back or part time work was all they could find rose to 9.0 million, and increase of 423,000 for the month.
 
So how does this recession compare to past downturns? Not very well. Look at the first chart below (larger version available at http://www.calculatedriskblog.com/).
 
Yes, it is true that the unemployment rate is still below the peak of the 1982-83 downturn, when it hit 10.8%, and still even below the 9.0% peak of the mid-1970s recession. However the demographics were very different back then as both baby boomers and women were flooding into the job market for the first time. Now some of the boomers are starting to take early retirement (sometimes involuntarily).
 
Note also that in the past 2 recessions, the unemployment rate peaked long after the recession was over. Now take a look at the lower red line on the graph. It shows the year-over-year change in employment, and by that measure we are clearly in worse shape than any recession since 1960. Also note that previous recessions followed periods of robust job growth, something that we have not enjoyed so far this millennia.
 

This recession is already longer than most, so the year over year change number is up against months where employment was already falling. The second chart (also from http://www.calculatedriskblog.com/) tracks the job losses from the start of the recession, not year over year. Since it is based on percent changes in employment it is already normalized for changes in the size of the work force.
 
Note that in most recessions since the end of WWII, by this point employment had already started rising, and in 2 cases, 1980 and 1974, had already past the previous peak in employment. Only 2 recessions, 1948 and 1958, produced shaper percentage declines in employment than this one has so far, and both of those had already started to turn by the time we were 15 months into the downturn.
 
The graph also points to the shallow but protracted nature of the last 2 recessions. This one seems likely to combine the depths of the early post war recessions with the duration of the recent recessions.
 
While it is possible that we will start to see the number of job losses start to decline over coming months (on a revised data basis, we may have already seen this, since January was revised to a loss of 741,000 jobs from the previous estimate of a 658,000 loss). This does not mean that the unemployment rate will fall.
 
Yes it will be progress if we just lose 600,000 jobs in April, but it still means more people out of work and lower incomes. Of course any forecast that shows a declining number of job losses over the next few months has to assume that General Motors (GM) does not go bankrupt and then proceed to pull suppliers like Lear (LEA) and TRW Automotive (TRW) under with it. The idea that there could be a quick, painless, prepackaged bankruptcy for GM is more of a fantasy than anything in Gulliver’s Travels. If it were to occur, look for at least a couple of months where the job losses pass the 1.0 million mark.
 

Read the full analyst report on GM

Read the full analyst report on TRW

Read the full analyst report on LEA