US: Unemployment Rate Rises to 8.9 Percent

Previously reported job loss has been revised upward by an average of 86,200 in the last five months.

The economy lost another 539,000 jobs in April, down from an average of 680,000 over the prior five months. The unemployment rate rose to 8.9 percent, in spite of the fact that the household survey actually showed an increase in employment of 120,000. On an age-adjusted basis, the current unemployment rate would be equivalent to about 10.5 percent in 1982, almost the same as the peak level hit in that year.

The biggest factor behind the slowdown was an increase of 66,000 jobs in the federal government, mostly due to the 2010 census. Private sector employment declined by 611,000 in April, which is still an improvement over the 680,000 average job loss for the prior five months. This improvement is explained almost entirely by slower rates of job loss in construction, manufacturing, and employment services.

Construction lost 110,000 jobs in April, compared to an average 121,000 loss over the prior five months. With manufacturing the numbers are 149,000 compared with 180,000, and with employment services the April job loss was 68,900 compared with an average 87,200 over the prior five months. The basic story in all three sectors is that they are running out of jobs to lose. This is most clear in the case of employment services, where the number of jobs is down by 32.8 percent from its pre-recession peak in December of 2006.

When making comparisons with prior months, it is important to remember that there has been a consistent pattern of sharp upward revisions to job loss numbers in subsequent reports. The number of jobs lost in February and in March was revised up by 66,000 in this report. On average, the initially reported job loss for the last five months has been revised upward by 86,200 in subsequent reports. If the April job loss is subsequently revised upward by a comparable number, then the rate of job decline, apart from the census workers, will be the same as the average for the prior five months.

If this proves to be the case, then the accelerated job loss in sectors like retail trade (especially car dealers) and financial services, and slower job growth in health care, will offset the slower rate of job loss in other sectors. It is also worth noting that the jobs imputed for new firms not included in this release continues to outpace the rate from 2008. There were 226,000 jobs imputed for new firms in April of 2009 compared with just 176,000 for April of 2008. Given the health of the economy in 2009 compared with 2008, this seems unlikely.

The surprising increase in employment shown in the household survey was concentrated among older women. The number of employed women between the ages of 45 to 54 increased by 106,000, or 0.7 percent. The number of employed women over the age of 55 increased by 99,000, or 0.8 percent. This is a striking rate of employment growth in a steep downturn, if it holds up in subsequent months.

The flip side is that the employment picture for men continues to deteriorate, with the unemployment rate for adult men rising by 0.6 percentage points to 9.4 percent. The rate for women is 7.1 percent. The unemployment rates for men and women had been almost equal before the downturn.

Most of the other data in the household survey looks bleak. The percentage of unemployment attributable to voluntary job leavers, a measure of confidence in the labor market, fell to 6.5 percent, equal to the low hit in November of 1982. The share of the long-term unemployed stands at 27.2 percent, the highest on record. This raises the prospect of millions of unemployed exceeding their period of extended benefits.

While optimists will be inclined to find "green shoots" in this report, on a close examination there is not much good news here. There appears to be some decline in the rate of private sector job loss, but this will largely disappear if the revisions follow the same pattern as in prior months. Furthermore, the slowdown in wage growth (almost zero in April) suggests that workers' purchasing power will be falling in the months ahead.

Dean Baker is the Co-director of the Center for Economic and Policy Research. CEPR's Jobs Byte is published each month upon release of the Bureau of Labor Statistics' employment report.

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