August unemployment report: Things are NOT getting better

Writers who have appeared in this column have been among the most outspoken in challenging those who tell us the recession is over. (“There really wasn’t one, anyway,” Treasury Secretary Paul O’Neill and others tell us.) And we derive little satisfaction when the monthly unemployment report issued by the Bureau of Labor Statistics (BLS) validates our conclusions. But with all of that, we are particularly disturbed by some of the numbers that are being kicked around these days.

We begin with the fact that long-term unemployment – workers who have been unemployed for 15 weeks or longer – stood at 2.6 million in August, 50 percent above year-ago levels. The picture is even bleaker when we consider that 1.5 million of that number have been unemployed for 26 weeks or longer, meaning that many unemployed workers have exhausted the extended benefits Congress enacted last December. Then there’s what’s called a “spell of unemployment” – the length of time during which a worker is counted as unemployed. The BLS says the average spell declined slightly in August and now stands at 16.2 weeks, a startling increase from the 1970s and ’80s when the average spell was between 10 and 12 weeks.

Official unemployment declined by 0.2 from 5.9 to 5.7 percent from July to August, reaching the lowest level since March. The statistics conceal as much as they reveal. Non-farm payrolls increased by 39,000 jobs for the month, all of it in the public sector, with much of that coming from federal government and reflecting a 20,000 increase in the number of airport security personnel. When all of the pluses and minuses are taken into account, the private sector lost 2,000 jobs in August.

Worst hit was manufacturing employment where 68,000 workers, most of them in capital goods industries such as fabricated metals, industrial machinery, electrical equipment and aircraft, were among those who joined the unemployment lines. This was the biggest one-month job loss since January and brings the total of jobs lost in the manufacturing sector to 1,860,000 – 10 percent of total employment – since July of 2000.

Employment in transportation industries declined by nearly 15,000 in August and this before the announced cuts of 55,000 at Consolidated Freightways and at several major airlines. Retail trade was also a big loser in August, with employment falling by 55,000, driven by a loss of 41,000 jobs in department stores and 20,000 jobs in restaurants.

And future prospects? The numbers are not encouraging here, either: True, temporary employment agencies added 51,000 jobs, which could be seen as evidence of an upturn in the demand for labor – except that it follows a decline of 30,000 jobs in this sector in July.

Nor does the hours data – “a 0.1 hour increase in the average work week” – give much reason for celebration. Even with the upturn reported in August, the index of aggregate hours in the private sector was 0.5 percent lower in August than in June.

While the drop in the unemployment rate was encouraging, there was little else in the report to indicate strength in the labor market: The number of workers involuntarily working part-time rose by 111,000, to its highest level since December. The percentage of unemployment due to job quitters, “people who feel confident enough to quit their jobs before having a new job arranged” was virtually unchanged at 10.0 percent.

This report, especially the sharp drop in manufacturing employment, provides more grounds to take the threat of a double-dip recession seriously. Consumers continue to sustain the economy, especially through their purchases of housing and new cars. However, this is leading to ever greater debt burdens and a housing bubble which is likely to deflate soon. With state and local governments cutting back, investment and net exports will have to pick up soon to sustain the recovery.

A tip of the hat to Dean Baker, co-director, Center for Economic Policy and Research.

The author can be reached at fgab708@aol.com