This page is temporarily not available. Please check later as it should be available shortly. If you have any questions, please email customer support at email@example.com or call 800-767-3771 ext. 9339.
While this was generally a much better than expected unemployment report, it also contained some significant bad news. The number of people who have been out of work for more than six months continues to climb.
Next week we should get the Job Openings and Labor Turnover Survey (JOLTS), which will tell how many people are getting laid off versus quitting and the actual number of new jobs created. The numbers today simply show the net difference between jobs lost and jobs gained, rather than the totals for each side, which are FAR larger.
Unfortunately, the JOLTS data will be for August, not September. The story from the JJOLTS data over the last year or so has been the problem is not a huge number of people getting fired, but from an extreme dearth of people getting hired.
It is the number of long-term unemployed that really make the difference between boom and bust. The extraordinarily long time that people have been out of work after they lose their jobs is what has really set this recession apart from all the previous pre-war recessions.
Average Duration of Unemployment Keeps Climbing
The average duration of unemployment (red line) rose to 40.5 weeks from 40.3 weeks in July, a year ago it was at 33.4 weeks. The year-over-year change, however, is exaggerated. The definition was changed in January, so the historical comparison for the average is now meaningless, or at least has to be taken with a big grain of salt.
Previously, if someone reported being out of work for more than 2 years, the BLS would enter them in the database for being out of work for 2 years. The maximum was changed to five years.
The month-to-month change is still for real, but the change in the definition makes the longer-term historical comparisons less relevant. For what it's worth, given the change in the definition, we set a new record high for the average duration of unemployment in Setember. Prior to the Great Recession, the previous all-time record high was set in June of 1983 at 20.8 weeks, but that too, was under the old definition. Still, a near doubling from the previous record (prior to this cycle) is very noteworthy.
The median (blue line, half above, half below) duration will always be lower than the average duration since it is impossible to be unemployed for fewer than zero weeks. It is also not distorted by the change in “top coding of the data. Its history is not quite as long as the average, but is at least consistent in definition for the whole history.
There the news was also bad. It rose to 22.2 weeks in September from 21.8 weeks in August, and from 21.2 weeks in July, but still below the 22.5 weeks in June. A year ago it was at 20.5 weeks. Given the change in the definition for the average, the median is the more reliable statistic right now, but both are telling pretty much the same story. If you are out of work, you are having a very hard time finding a new job.
Prior to this downturn, the highest the median duration had ever hit was 12.3 weeks in May of 1983. Note that it is normally the case that the duration of unemployment continues to rise even after the recession ends. This happened not just in the last two recoveries, but in all post-war recoveries.
However, following the 1991 and 2001 downturns the persistency of high and rising unemployment duration was much more pronounced than in the earlier downturns. This time, the peak was a Mount Everest relative to any previous experience (except perhaps for the Great Depression, but that data is not available).
The census bureau tracks four different groups by length of unemployment. The short-term unemployed are those that have been out of work for fewer than five weeks (red line). Almost always this is the largest group of the unemployed.
The next biggest group is usually those that have been out of work between five and 14 weeks (maroon line). Being out of work for a month is really not that big a deal, but as the joblessness stretches on it becomes a bigger and bigger problem. Not only do your finances start to run dry, but your contacts start to dry up and your skills start to wither.
The longer you are out of work, the lower your likely salary once you return to work. Normally the next two groups, those out of work for 15 to 26 weeks (green line), and those out of work for more than 27 (blue line) weeks are a very small proportion of the total unemployed.
That changed in a very big way during this downturn, and in September, 6.242 million, or 44.6% of the 13.992 million total unemployed have been looking for more than 26 weeks. That is a increase of 25,000 from August, and 89,000 from a year ago. The peak in long-term unemployed was in June of 2010, when there were 6.710 million very long-term unemployed, or 45.6% of the total unemployed then.
The numbers in the graph below are not adjusted for population growth, so we should expect to see a bit of an upward tilt in all four groups over time. Still, in a healthy economy, the number of very long-term unemployed should be down closer to 1 million, not above to 6 million.
On the other hand, the 2.772 million (up 17,000 from last month) who are out of work for less than five weeks is actually slightly lower in absolute terms than the average of the last 30 years (despite population growth over that time).
Note that in every prior post-war recession, the number of short-term unemployed remained the largest group. The massive number of long-term unemployed is really what sets this downturn apart from all the previous ones.
Overall, the employment report was good news. The number of jobs created was much better than expected at 103,000 overall and 137,000 on the private side. If you add it then revisions to August and July, we have 202,000 more jobs than we thought we had last month in total, and 213,000 more on the private side.
The unchanged unemployment rate for the month was due to a rise in the participation rate (still very low) which is a good sign for the economy. If it could be sustained, adding over 200,000 jobs a month should be enough to start to bring down the unemployment rate and put the vast army of almost 14 million unemployed people back to work.
Please login to Zacks.com or register to post a comment.