Dean Baker: US Employment Free Fall Continues

Hours worked in durable manufacturing fell at a 30.7 percent annual rate since October.

The January employment report showed the economy losing 598,000 jobs in the month. In addition, there were sharp upward revisions to the job loss figures for the prior two months. The data now show the economy losing 1,772,000 jobs over the last three months, an average of 591,000 jobs per month. All of this job loss came in the private sector, as employment in the government sector was unchanged over this period.

The data in the household survey indicates an even more dire situation. The unemployment rate rose by 0.4 percentage points (pp) in January to 7.6 percent. The employment rate fell by 0.5 pp to 60.5 percent, a level that is already 0.7 percentage points the low hit in the 1990-91 recession. The 1.5 percentage point drop in the employment rate over the last three months is equivalent to a decline in employment of 2,800,000 people.

The sharper drop in employment implied by the household data could be attributable in part to the fact that the Labor Department imputed more jobs for new firms not captured by the survey in recent months than it did in the corresponding months for the prior year. It is implausible that new firms have generated more jobs in the four months between September of 2008 and January of 2009 than in the corresponding months of the prior years.

While unemployment is hitting all demographic groups, blacks and Hispanics have been hit hardest. The unemployment rate for African Americans rose by 0.7 pp to 12.6 percent in January, an increase of 3.4 pp from its year ago level. Black men have been hit especially hard. Their unemployment rate rose by 0.7 pp to 14.1 percent, an increase of 5.8 pp from its year ago level. The unemployment rate for Hispanics rose by 0.5 pp to 9.7 percent, a rise of 3.4 pp from the year ago level.

Older workers continue to fare reasonably well. Employment among people over age 55 rose by 122,000 in January and is up 751,000 over the last year. By contrast, employment among workers between the ages of 35 and 44 is down by 625,000 over the last year, or 1.8 percent. Employment among people between the ages 20-24 and ages 16-19 fell by 5.3 percent and 9.6 percent, respectively.

Job loss continues to be concentrated in construction and manufacturing. Construction lost 111,000 jobs in January, bringing the loss over the last three months to 322,000 jobs, or 4.6 percent of employment in the sector. It is likely that the establishment data understate job loss in construction since the sector employs many undocumented workers who may never show up on company payrolls. Over the last year, the establishment data show a loss of 747,000 jobs. The household survey shows a decline in employment in the sector of 1,266,000 people.

The manufacturing sector lost 207,000 jobs in January. Over the last year it has lost 1,031,000 jobs, 7.5 percent of employment. Employment in the auto industry has fallen by 197,000 over the year, or 21.6 percent.

Finance lost 42,000 jobs in January, while transportation lost 43,700. The retail sector lost 45,100 jobs, bringing job loss since October to 218,600. Employment services lost 89,000 jobs in the month. The 248,100 jobs lost since October is equal to 8.3 percent of employment in the sector.

In addition to the sharp decline in jobs, hours are falling also, leading to an 8.8 percent annual rate of decline in the hours worked index since October. The employment diffusion indexes are at or near record lows, indicating that the situation is likely to get worse.

The only sectors still adding jobs are education and health care, which together added 54,000 jobs in January. The government sector added 8,000, with gains in federal employment outweighing small losses at the state and local level.

Remarkably, nominal wages continue to rise. Nominal wages rose at a 4.0 percent annual rate over the last quarter. With the CPI falling sharply, this translates into an extraordinary rate of real wage growth for those who still have jobs.

On the whole this report is about as bad as imaginable.

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Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of "Plunder and Blunder: The Rise and Fall of The Bubble Economy." He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues. You can find it at the American Prospect's web site.

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