The Jobless Recovery

Economic Policy Institute ^ | January 24, 2002 | Jared Bernstein

[Red Jones]

hey, there was 1 airline, I think National?, I'm not sure their name. But they flew mainly out of a washington dc area airport (Reagan airport). Their airport was completely shut down and they couldn't fly any at all for many months. That airline went bankrupt, got no bailout whatsoever. All the other airlines that were not nearly so negatively impacted are getting bailouts. And in at least one case if they merely paid their CEO a reasonable salary they wouldn't need the bailout.

[Red Jones]

you emmigrated earlier than I thought.

[Red Jones]

oh man, I just discovered that the link above goes to the home page where the article is, but it doesn't go directly to the 'Jobless Recovery' article. So, I put article below without tables. Go to the link and look for 'Jobless Recovery' to see tables. It says we have 2 million fewer private sector jobs in real numbers than a couple of years ago. And at a time when the population is growing rapidly due to immigration that the americans in fact disapprove of. Our leaders in both parties have the wrong priorities. That is the problem. These negative changes over the last 30 years are exactly what could reasonably be expected to be the results of changes ingovernment policy. and they've made it taboo to even talk about. Article follows:

The jobless recovery
Suffering from the recession’s aftershocks, labor market conditions continue to worsen

by Jared Bernstein

Though the recession that began in March 2001 has not yet been declared officially over, most economists believe it ended early in 2002. However, the labor market downturn is far from behind us. Today’s labor market is much weaker than it was one or even two years ago, and the “jobless recovery” grinds on.

The jobs picture is so serious that steps to stimulate the economy and generate job growth are urgently needed. Any stimulus proposal should be evaluated primarily on its impact on job creation and its ability to reverse the current trend of weakening wage growth.

An examination of the trends in key labor market indicators between the end of 2000 and the end of 2002 shows widespread and persistent weakening in the labor market. Key findings are:

Despite the fact that the recession is widely believed to have ended last year, unemployment rose throughout 2002, ending the year at 6.0% in December. Since the most recent economic peak, the jobless rolls have expanded by 2.8 million.

Compared with the end of 2000, there are now 2.1 million fewer private sector jobs. Payrolls contracted not only over the recessionary year of 2001, but also over the alleged recovery year of 2002.

The decline in private sector jobs at this point in the recovery is greater than in any of the past three recessions/recoveries.

The lack of job creation also has led to long spells of unemployment. The average unemployment spell has increased by more than five weeks compared with its level in the fourth quarter of 2000. There are now 1.7 million people who have been jobless for more than half a year.

The lack of employment growth has led to slower growth of the labor force, as fewer people choose to compete for scarce jobs. The labor force is now growing half as fast as it was two years ago, a sure sign of a weak labor market.

The rise in unemployment has led to slower wage growth, real income losses, and higher poverty rates.

In 2001, when the unemployment rate climbed to 4.8% from 4.0% in 2000, real household income fell by 3% for the poorest households and 2% for middle-income households, while poverty increased by 0.4 percentage points. Although income and poverty data for 2002 are not yet available, given that unemployment was another point higher in 2002 (5.8%), the incomes of low- and middle-income households very likely fell even more last year.

According to a new report from the Bureau of Labor Statistics, median weekly earnings fell 0.5% in real terms over the past year (from fourth quarter 2001 to fourth quarter 2002).
The jobless recovery
The tables below compare the recent trends in key labor market indicators over three time periods: the last quarters of 2000, 2001, and 2002. These periods span the time from the labor market peak of the last business cycle through the most recently completed quarter. If the alleged recovery had reached the labor market, we would expect to see trends worsening during 2001 but then improving in 2002. Instead, we see a steady worsening. Some negative trends, such as long-term unemployment, even accelerated.

Table 1 shows one of the primary indicators of labor market weakness: the unemployment rate, which is the share of the workforce unsuccessfully looking for work. At the end of 2000, the unemployment rate stood at 4.0%. With the onset of recession in early 2001, the rate began to climb, reaching 5.6% by the last quarter of that year. Since then, joblessness has continued to rise, reaching 5.9% in the most recent quarter. As the second panel shows, the ranks of the unemployed grew over this two-year period from 5.6 million to 8.4 million, an increase of 2.8 million unemployed people.

Table 1 also shows unemployment rates by gender and race. Note that the African American rate has risen the most, reaching double digits by the last quarter of 2002, at 10.8%. This represents an increase of 582,000 in the number of black unemployed persons.

Table 2 shows one reason why unemployment keeps rising: the absence of job growth. After growing by 1.6% in 2000, the nation’s payrolls contracted by 0.8% in 2001 (1.4% in the private sector), and continued to decline, though less quickly, through 2002. Job losses over this period amounted to 1.4 million overall and 2.1 million in the private sector (since government hiring is less sensitive to the business cycle, private sector employment growth is more indicative of economic conditions).

The manufacturing sector has been particularly damaged, falling by 6.7% (1.2 million jobs) in 2001 and 3.7% (another 642,000) last year. Job losses in retail trade actually accelerated in 2002, driven partly by particularly weak holiday hiring.

Figure A compares private sector employment losses over four different recessionary periods. In each case, we measure employment growth from the low point of unemployment through the subsequent 27 months (since we are now 27 months beyond the unemployment low of 3.9% in October 2000). Even though other recessions were deeper and lasted longer than the most recent one, payrolls have fallen persistently throughout this 27-month period. Thus, as shown in the figure, employment losses in the most recent recession and subsequent jobless recovery have been greater than in any of the other three recessions and recoveries. Other recessions may have led to greater losses initially, but by this point in those recoveries, the economy had bounced back and payrolls were again expanding.

Table 3, meanwhile, shows that the decline in employment has meant not only more unemployment, but also much longer spells of joblessness. The table shows the trend both in average weeks spent unemployed and in the share of the unemployed who have been out of work for at least half a year. Both series show that the problem of long-term joblessness worsened in 2002, as the jobless recovery took hold. Since the final quarter of 2000, the average time spent unemployed has grown from about three months (12.4 weeks) to about four and a half months (17.9 weeks), an increase of well over a month. At the same time, the share of the unemployed who have been without work for at least 27 weeks has almost doubled, from 11.1% to 20.9%. Thus, by the last quarter of 2002, 1.7 million job seekers had been without work for at least half a year.

Some commentators have argued that, since unemployment has yet to surpass 6%, this period of recession and slow recovery has been more benign than previous ones. Such analysis overlooks two countervailing factors, however. First, the pain of recession is experienced not only in the level of unemployment but in its trend. In this regard, the two percentage-point increase in unemployment over this downturn is not far behind the increase over a comparable time period in the last recession (which was 2.3 points). Second, in the current recession, the lack of job creation has led to a marked decline in the growth of the labor force. Since fewer workers are competing for scarce jobs, this has the effect of preventing the unemployment rate from rising more quickly, masking the full extent of the underlying hardship.

Table 4 presents the percentage changes in the labor force over the fourth quarters of the past three years, showing a clear deceleration from 0.9% in 2000 to 0.4% in 2002. The second column of the table shows the net growth in the number of persons in the labor force over the past few years. Between the fourth quarters of 1999 and 2000, the labor force grew by 1.2 million. It grew slightly less in 2001. Then, in 2002, growth dropped dramatically, with only 508,000 people joining the labor force that year: a clear symptom of weak job creation.

Table 5 shows that the loosening of what had been a very tight labor market has meant slower growth in wages. It shows the annual changes in hourly wages over three years (comparing data from the third quarters of each year, since data are not yet available for the most recent fourth quarter). Wage changes are shown by gender for low-, middle-, and high-wage workers, and are based on nominal wages – not adjusted for inflation – with the rate of inflation shown in the last column.

Nominal wage growth has slowed considerably. By the third quarter of 2002, nominal hourly wages for low-wage workers grew 1.4%, compared to 5.3% in 2000. Middle and high wages have similarly decelerated. Inflation also slowed over this period, so these smaller nominal wage increases do yield more buying power than they would have a few years ago. However, a new report by the Bureau of Labor Statistics with data through the end of last year finds that the nominal median weekly earnings of full-time workers grew 1.7% between the fourth quarters of 2001 and 2002, which is below the rate of inflation for that period (2.2%).1

Even if the labor market were to improve soon, nominal wage growth would likely be slow to revive. This is because there is a considerable lag time between rising unemployment and its negative impact on wage growth (wage growth this year may be just beginning to suffer from last year’s rise in unemployment).

Table 6 shows the resulting impact on living standards as reflected in the Census Bureau’s annual income data. Although such data only go up to 2001, the impact of the recession is quite clear. The contracting economy, particularly the weakening labor market, helped drive real household incomes lower, with the largest losses occurring at the bottom of the income scale. Income fell 2.9% in real terms for the poorest households, and 1.8% for middle-income households. It grew slightly only for those at the top of the income scale. (Poverty also rose by 0.4 percentage points in 2001.)

It is important to note that these losses occurred simultaneously with the rise in the average annual unemployment rate from 4.0% in 2000 to 4.8% in 2001. Unemployment rose another point in 2002, on average, to 5.8%, and it is highly likely that the incomes of middle- and low-income households contracted further last year.

These wage and income trends reveal that the weak economy is not simply a problem for the unemployed. Many of those who have kept their jobs are facing less job security and are considerably less likely to see the type of wage increases that prevailed a few years ago. In 2000, when unemployment was hovering around 4.0%, the tight labor market ensured that the gains of economic growth were broadly shared and that wages and incomes rose for most working families. These conditions are now unlikely to return until growth accelerates and unemployment falls below 5%.

In short, these tables help reveal the current weakness in the labor market, and its consequences. High unemployment rates relative to a few years ago are beginning to lower the living standards of many working families. The persistent lack of job growth is leading to lengthening spells of unemployment and slower wage and income growth. The primary goal of domestic economic policy at this point should be to target and reverse these negative trends.

[Souled_Out]

Sorry to hear you're having hard times.

I'm not asking for your sympathy. I’m just trying to make the point that it’s not your money that is being used in providing unemployment benefits to the unemployed. While there are always people that will take advantage of the system, there are more people that need it to temporally get by until things get better. It is compassion, not sympathy that makes the difference.

Here's a suggestion, U-Haul. I'd suggest moving to NC, but we have little tolerance for whiners.

Thank you for the suggestion. I apply for jobs in any location across the United States and I am willing to move if I have an opportunity. A statement of facts is usually not considered whining but blanket condemnation of people you do not know and spewing off about conditions you are not aware of is.

Keep your 'dumbass' comments and sarcasm for someone who cares.

Yeah, that statement was a little over the top.

Please accept my apologies.

It is pretty sad that you do not care about other people and can justify in your mind statements that write off and classify people you do not even know. In my youth I was a DemocRAT and one of the biggest flaming LIBERALs you would ever hope to meet. It took me a long time to become an independent conservative because I had this mistaken idea that I was helping people by supporting socialistic programs. I see now that I was doing more harm than good. I never stopped caring about other people but I did change my method of helping. Everyone needs help at sometime in their lives. I just hope when that time comes for you there is someone with more compassion than yourself available.

[A. Pole]

Lots of businesses were hurt by 9-11

I am intrigued, why people like you care more for corporations than for people?

[TC Rider]

but blanket condemnation of people you do not know and spewing off about conditions you are not aware of is.

My original post: there are some percentage of workers who would get off their asses and go back to work.

Hardly a blanket comdemnation.

I'll stand by my original observations. There are jobs for everyone in America. Maybe not in your career choices, or choice of geographical location, or income level.

You both made your own choices and continue to do so.

[ARCADIA]

I agree with you guys. Some of these fair wind people are going to wake up to a very unfortunate surprise soon. I hope not. But anyone who can be so totally oblivious to what is going on around them really needs to get out more. Here is a hint for you: run over to your favorite retail outlet and make a list of everything you find that was made in the USA. The list has grown so short you probably will not even have to sharpen your pencil.

The US is being systematically raped.

Ignorance is bliss. Enjoy it while you can.

[staytrue]

If I want to work at a job and someone wants to pay me to do it, but the US Govt. forbids it, then I deserve a "bail out" too. This is what the govt. did to the airlines when they shut them down for a time after 9-11. There were people wanting to fly, the airlines probably would have been willing to fly, but the govt. did not allow it.

[staytrue]

I will agree with you that the economy stinks. I think it is because of excessive govt. and excessive debt.

I would like to go back to the Great Depression years and ask, why did this happen. I think it was because of excessive debt. I don't think you can blame the great depression on illegal immigrants, trade deficit, cheap chinese goods, the japanese, the french, drug abuse, africa, aids, over taxation, arabs , free trade, globalization, or any other convienent scapegoat.

I would like to hear your theory on the great depression and why it happened. You may find a lot of parallels to our time now, namely excessive debt and stock speculation and manipulation.

Finally, I just don't understand how you can make statements like "Only in the last 30 years have we made backwards movement. " when you have the counter example of the Great Depression.

[Red Jones]

of course we had backwards movement in terms of prosperity for our people during the 1930-1945 period. But I view that as an aberration and would throw it out of the statistics for analysis. Since 1970 we've had slow backwards movement that is difficult to perceive when you're living in this time. But it is real. And this is unprecedented in our nation's history. My main argument is that all of this backwards movement can be traced to bad government policy and that we as a people are letting them walk all over us. I believe that this backward movement in the last 30 years is due to many very bad regulations of private industry, unwise tort laws, run-away government spending, high taxes in some cases, a dysfunctional education system and in the last 15 years very stupid trade policies.

I am not an economist, but I can regurgitate what I read about the 1930's depression from Milton Friedman's book. After ww1 the economy had some very rough spots. As you know we had recently imposed an income tax. Coolidge cut taxes dramatically and we had a very big boom after that during the 1920's. It was a great boom, all boats rose with the tide. But the stock speculators got greedy. They made rules on wall street that you could buy stocks with borrowed money and they lowered the standards in such a manner as to encourage speculation. So, a bubble developed in the stock market. When the correction came it harmed relatively few people at first. But it harmed some people and there was a bank in NYC that went bankrupt as a result of this. As they shut down lots of people lost their deposits because we didn't have FDIC back then. This caused another bank failure in NYC several weeks later. The Federal Reserve at that time didn't believe in bailing out banks in order to protect the nation's money supply. They knew full well that the money supply was being pummeled each time a bank went under and they did nothing to stop it. By 1932 one third of the banks in our nation had gone bankrupt and the money supply had contracted by one third. At that time the philosophy changed and they decided to intervene and stop further bank bankruptcies. But the damage was done. Our economy was in a shambles and it didn't come back until post 1945 really. Some people who believe Federal Reserve propaganda will actually tell you that Smoot-Hawley caused the depression. That was a minor factor. The main factor was one third drop in money supply and that was only triggered by the initial stock market correction and resulting bank failures in domino fashion.

I think now we need a similar intellectual adjustment that we had in 1932 when we finally decided to not allow further bank failures, when we finally decided that keeping the money supply stable was a key. Our trade relationships must be prosperous to us. This unlimited free trade, especially with a nation that does not let it's currency float is suicidal. A hundred years ago the Republicans stood for protectionism. Today it is a dirty word. I think trade is great, but it must benefit both nations engaging in the trade. I've outlined elsewhere the changes I seek in trade policy.

I think we have a great moral obligation to open up trade with the poor nations of the planet. Bush is currently planning on opening up the ability of very poor african countries to export to the US and he knows full well that they are unable to buy anything from us. I think that this is good because these very poor countries need a lifeline. Just 15-20 years ago China needed a similar lifeline and I'm glad we threw them one. But today China does not need that. We need to have better trade policies.

THe United States as an institution should look out for the interests of the american nation. Other concerns should be secondary. If we build a world where governments routinely ignore the interests of the nation they allegedly represent, then we are not building a nice world at all.

[ARCADIA]

As far as I can tell, when you take our GDP at a per capita level, we peaked in 1966 and have since dropped to around 45% of that number. We have less then half of the real income per person that the previous generation did. That is why we can no longer afford social services, and why we have dual income homes.

[A. Pole]

If I want to work at a job and someone wants to pay me to do it, but the US Govt. forbids it, then I deserve a "bail out" too.

What if US Govt. sets program to replace American workers with temporarily indentured foreign workers who sacrifice in hope to be rewarded with the citizenship? Should those American workers to be "bail out" as well?

[A. Pole]

I think we have a great moral obligation to open up trade with the poor nations of the planet. Bush is currently planning on opening up the ability of very poor african countries to export to the US and he knows full well that they are unable to buy anything from us. I think that this is good because these very poor countries need a lifeline. Just 15-20 years ago China needed a similar lifeline and I'm glad we threw them one. But today China does not need that. We need to have better trade policies.

Very good point. Chinese economy got a strong jump start into modern industrial age and is followed by India. This is very good since the two huge leading Third World countries can lead undeveloped world into prosperity.

But the "free trade" policies should be re-calibrated. While poorer countries are catching up, Americans should not be pushed into the opposite direction. Let them meet us at our level, rather than meet in the middle.

[waterstraat]

What I have said here a hundred times before in the last several months need not be repeated. We are seeing the economy of this country being shipped out of the country by people who seem to have orgasms doing it. Bush is one of those people.

You are absolutely right in all you said. Everything today is being done solely to maximize big company profits - so those big companies can contribute more to the campaign funds of politicians, and that is all the politicians care about.

[nopardons]

You may have reaf many articles; it is patently clear that you don't understand what you've claimed you've read, dear. ;-)

Taxation and greed, far outweigh current price levels, which, FYI are LESS , in many instances ( gasoline being but one such item ) than they were 30 years ago, in adjusted dollars, for two earners in families. You don't know anything about economics, nor historical standards of living. You keep proving this, by posting erronious drivel.

[Red Jones]

thank you dear.

[nopardons]

So, RLK gets papers published ? Where, in what, and so what ? Lots of people get articles and papers published, which are dead wrong,filled with errors, and are just plain junk.

In 1921, the unemplotment level was at 11.7%, in 1951, it was 3.3%, in 1961, 6.7%,in 1971, 5.9%,in 1981, 7.6%. There are hard, cold, actual figures for you, instead of your spurious, pulled out of thin air crap.

I'm not a " sheeple ", though it seems that YOU are. I have NO " keepers ". though it appears that YOU must have one or more. I don't live in a " cocoonm ", though it's obvious, that YOU live in cloud coo coo land of irrationality and bizarro nonsense& paranoia ! Since I graduated from school long before 1970, your ridiculous assertations , even IF ( which it isn't !) true, don't apply to me. Your claims are so far from being 100 % accurate, as to be worse than laughable. Facts don't matter to you at all; it's say anything, just to " prove " your point; which you have yet to do and can't. LOL

I am not a male, I am not a " sheeple ", I haven't been brainwashed ( unlike YOU ), I am not delusional ( unlike YOU ), and since you so enjoy personal attacks and name calling, it would behoove you, dear, to at least attempt to use facts, historical data, list your sources, and NOT to even try to engage in debate, your intellectual superiors. You're a mental midget, ill educated, ill mannered, unknowledgeable, and ridiculous.

Every nation, BUT the USA has, throught history, oppressed and enslaved its populace ? ARE YOU REALLY THIS IGNORANT OF WORLD HISTORY ? ARE YOU ? England stopped slavery before we did . The standard of living, here, was for most of our recorded history, at a far lower level, it was in many other places in the world. Slavery, indentured servitude, and tenant farming was, for a long time, part of our nation's standard of living. There were press gangs ( look that up; I'm sure you don't know what that is ), well into the 19th century here.

Want to see a grade A, #1 ignoramous ? Go look into the nearest mirror ! After many decades of actual study, do come back and give this another try, you pompous, arrogant, delsusional cretin.

[nopardons]

In 1965, the mentally retarded ( even those NOT that badly off ) were, for the most part institutionalized and did NOT , as a general rule have a job; certainly NOT one that supported him or her. My Master's degree is in teaching the severely mentally retarded. What are YOUR qualifications to speak on that subject ?

Bums are called bums, dear, because they don't work.

Drunks ? Yes, some had / still have jobs. They also used to be fired and /or have job related accidents , which prevented them from working.

The homeless ? You're right, we didn't used to have quite so many. Previously, the dope addicted, alcohol addicted, and the mentally retarded / emotionally crippled were institutionalized and off the streets. The " homesless " used to be called BUMS .

There have ALWAYS been people begging on the streets of this country. What are you, some kind of child, who imagines that his/her generation started everything ?

Not a single American, in 2003 is starving to death . People routinely starved to death, though, in previous times, in America.

The unemployment figures, for 1962, were 5.5% NOT 2.2% , as you've claimed.

It's anject stupidity to make false/spurious c laims here. Get your facts and figures correct, before you post. You keep trying to debate with lies, which doesn't work.

You're even worse than those, whom you call " sheeple " !

[nopardons]

You should pay me, for the education I'm giving you; dear. ;-)

[nopardons]

The more goodies , that a government hands out, the more people are going to demand them. When the level, at which poverty is raised and raised, and raised again, more people will, surprise, surprise, be at that level.

Soooooooooooooo, you little Socialist, want the government to be mommy & daddy to all and supply everyone with their medical needs taken care of, do you ? Shame on you !

There are many and varied reasons that ALL medical procedures and supplies are expensive today. Health care used to be out of reach / put people in hock / destituted them, for most of our nation's history. What first started the spiralling costs, were, the UNIONs demand of employers, to GIVE health insurance ( in the begining, for a pittance and then for FREE ) to the workers. Try keeping to historical facts.

Before recent government regulations on industries ( and there have ALWAYS been some regulations; look it up ! ), the UNIONS managed to take out many industries; steel, for instance, dear, with their ever increasing, stweetheart deals and outrageous demands and strikes.

You abject lack of knowledge, coupled with you paranoid hatred for anyone named Bush, is interesting...in a purely sociologial way. Abherent mental disease is fascinating. You are supplying much evidence , for those interested in that topic. Luaghs too; even though it is bad manners to laugh at the afflicted. ROTFLMSO