Demographics of Joblessness
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 another piece of the “no change” meme is that this month, the unemployment rates for both men and women were unchanged.
In September, the unemployment rate for adult men remained at 9.8%, and up from 9.7% in July, but down from 10.3% a year ago. A bit of that is an illusion, though, as the participation rate for men ticked down from 74.3% in August to 74.2% in September, and a year ago it was 74.7%. The employment rate for men ticked down to 66.9% from 67.0% in August, and was also the 67.0% rate of a year ago.
For women, the unemployment rate was unchanged at 8.0% in September, up from 7.9% in July and a year ago. However, in the female case, both the participation rate and the employment rate rose by two ticks, to 60.3% and 55.5% respectively. A year ago they were at 60.5% and 55.7%, respectively. Thus while it looks like men and women fared equally in the last month, with the unemployment rate unchanged for both, women are doing better directionally, as has generally been the case in the Great Recession.
There are two possible reasons for men faring worse than women in this downturn. 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 do, 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.
Teens, regardless of gender have had a very hard time of it in this recession. Just go to a McDonald’s (MCD) and you will see this for yourself. Normally the blemishes you see on the cashier’s face are from acne, not wrinkles and age spots as is the case now. In September, the teen unemployment rate fell to 26.0% from 26.3% in August and from 26.1% in July and a year ago. The drop, though, was all due to a big decline in the participation rate which fell to 35.2% from 35.0% in August, but well below the 36.8% rate of a year ago.
The percentage of teens that actually have a job was just 25.3%, down from 25.9% in August and down from 27.2% 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.
Whites, Blacks and Hispanics
Not surprisingly, Whites have a lower unemployment rate that do Blacks or Hispanics. The rate for whites was unchanged at 8.7% from August and up from 8.6% in July, but down from 9.1% a year ago. The participation rate and the employment rate for whites were both unchanged on the month at 65.2% and 59.5% respectively. The employment rate for whites has held steady at 59.5% for four straight months now, but that is down from 59.7% a year ago.
The unemployment rate for Blacks fell to 16.1% from 16.3% in August, and remained well above the 15.6% rate in July the 15.5% rate last year. Here again, the headline unemployment numbers are deceptive due to changes in the participation rate. For the month, the participation rate for blacks fell to 61.7% from 62.2% in August, and up a tick from a year ago. The employment rate for blacks fell to 51.7% from 52.0% in August, and the 52.1% rate of last year.
For Hispanics, the unemployment rate in September rose to 12.4% from 12.0% in August but down from 12.7% last year. The monthly deterioration is mostly a mirage, though, as the participation rate rose to 67.5% from 67.2% in August, but below the 67.8% last year. The employment rate actually fell to 59.2% from 59.1%. However, part of the year-over-year drop in the unemployment rate is for real as last year’s employment rate was also 59.2%.
Stay in School
The unemployment rate for high school drop-outs soared to 15.4% in September from 14.0% in August and from 13.8% in July, and is up from 15.0% a year ago. The deterioration in the job situation for those without even a high school education is for real. The participation rate among the drop-outs rose to 46.7% from 46.4% in August and 47.3% in July and is down from the 47.1% level of a year ago.
The percentage of high school drop-outs actually employed fell to just 39.3% from 39.9% August and from 40.8% in July and is down from 40.0% last year. Those who dropped out of high school have dropped out of the labor force over the last year.
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) fell to 10.0% from 10.3% in August from 10.1% in July and 10.8% a year ago. In all three months, the level was far below that for drop-outs.
The drop in unemployment for high school grads looks to be for real. The participation rate was unchanged on the month at 61.9% (notice that it is significantly higher than for drop outs) and down just a tick from a year ago. The employment rate for high school grads was also unchanged on the month at 55.6% and is up from 55.6% a year ago.
Those who went to college but did not finish, or only got an Associates degree, had an unemployment rate of 9.1% in September up from 8.7% in August, and a big jump from the 8.3% rate in July and the 8.6% rate a year ago. The news for those with associates degrees is actually somewhat worse than that since the participation rate fell to 70.4% from 70.5% in August and from 70.7% a year ago. The employment rate fell to 64.0% from 64.4% in August and 64.6% a year ago.
For those who stay in school to get their BA (or higher), the unemployment rate fell to 4.4% from 4.6% in August, and down from 4.8% a year ago. The monthly improvement is actually better than the unemployment rates suggest because the participation rate jumped to 76.4% from 75.8% in August, but it remains below the 77.3% level of a year ago. The percentage of college grads with jobs jumped to 73.1% from 72.3% in August, but remains below the 73.6% level of a year ago.
In other words, the advice your mother gave you to stay in school is more valuable than ever in a deep recession or a sluggish recovery. The graph below (from http://www.calculatedriskblog.com/) tracks the unemployment rate by education level since 1992. This recession has been tough on everybody, but especially tough on those without a lot of formal education.
Where the Jobs Are and Are Not
As mentioned at the outset of this post, most of the drop in total payrolls came from the layoffs of temporary Census workers. Excluding the Census, there were just 18,000 fewer jobs in September than there were in August.
The other big area of employment decline was in state and local governments. They accounted for an additional 76,000 jobs lost, on top of dropping 39,000 jobs in August. Over the last year, state and local governments have dropped 274,000 jobs. 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.
The private sector added 64,000 jobs, down from an addition of 93,000 jobs in August and 117,000 in July. A year ago, the private sector shed 186,000 jobs in September. This is the ninth straight month that the private sector has added jobs, but the pace has not been high enough to keep pace with the growth in the population.
Within the private sector, the goods producing sector lost 22,000 jobs. The construction industry lost 22,000 jobs, a big turnaround from last month when it actually gained 10,000 jobs, the first increase in recent memory. 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. The August gain was revised down from a gain of 19,000 jobs.
Manufacturing lost 6,000 jobs, on top of the 28,000 jobs lost last month, breaking a very nice string of gains since the in that sector. All of the loss in manufacturing came from the non-durable goods manufacturers, while durable goods employment was unchanged.
The service sector added 86,000 jobs in the month, up from an increase of 83,000 in August and 80,000 in July. Private service sector job gains were revised up from 67,000 in August and 70,000 in July. A year ago, the service sector dropped 65,000 jobs. The biggest contributor to service sector jobs, as always, was the health care industry, which added 32,000 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 it is for men.
Of particular interest is the increase in temporary workers — meaning temps working for firms like Kelly Services (KELYA) and Manpower (MAN), not the Census workers. Those jobs increased by 16,9000 in September on top of 17,700 in August after falling by 6,700 in July.
It is not that being a temp is the greatest of highest paying jobs 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. This is particularly is hours have been previously cut back due to slow demand. The upward trend in the average work week is a very good sign in that regard, in addition to the fact that working more hours means more income, and thus more spending by hourly employees.
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. The dip in temp workers was one of the more disconcerting things about the July report, and it is very good to see that temp workers are back on track in August and September.
Better than Expected but Not Good Enough
Overall, this was a little bit softer than expected report in terms of total employment from the establishment survey. However almost all of the miss came from a bigger than expected decline in state and local government employment. The household survey which provides the unemployment rate (and the participation and employment rates) was actually a little bit better than expected. It actually showed an increase of 141,000 total jobs and a drop of 93,000 in the total number of unemployed. The private sector continues to add to jobs, and has now done so for 9 straight months. The unemployment duration numbers were a mixed bag.
All that being said, however, 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 two recessions, 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). 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 1991 downturn; they just want a job that can support their family.
The damage done by this downturn was far deeper and more extensive than in those downturns. The final graph below, also 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, 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, long time before we surpass the total number of jobs the economy had back in December of 2007. At the pace of the first half of the year it would be in mid-2017 before we saw a new peak. Even if we could go back to the awesome job creation pace of the late 1990’s it would be 2013 before we got back to pre-Great Recession levels of 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. Unfortunately, there seems to be no appetite in Congress for renewing it. Instead, we get misguided demands that we immediately try to balance the budget, and in the process repeat the mistake that FDR did in 1937 when he prematurely cut back on the New Deal stimulus and pushed the economy back down, and it only revived when a much bigger stimulus, known as WWII, came along.
The stimulus spending at the federal level was substantially offset by anti-stimulus for the state and local levels. That anti-stimulus is continuing. Just yesterday, 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.
Hypocritically, those who are demanding immediate cut-backs in spending to get the budget deficit under control are demanding that the biggest source of the deficits — the Bush tax cuts, particularly those on the highest incomes — be made permanent. Call it the “pro high unemployment caucus” in Congress. It currently has 40 members in the Senate, and the odds are that there will be more members in the next Congress.
More monetary stimulus from the Fed would help, but they have already done quite a bit, and short term rates are already as low as they can go, and long-term rates are new historic lows. Pushing down interest rates a little bit further might help a bit at the margin but is not going to make a lot of difference. Fiscal stimulus would be far more effective at this point.
Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market beating Zacks Strategic Investor service.
