U.S. Unemployment Rates RiseSharply And Rapidly For All

The current recession has been harshest in the labor market. Employers look to cut costs as top-line revenues falter. Though the June unemployment rate of 9.5% was below the 1981-82 peak of 10.8%, the speed of the rate's recent increase has been notably swift. Today the rate is up 3.9 percentage points from one year ago. That matches the record increase for twelve months set during the 1973-75 recession when the unemployment rate reached its peak of 9.0%. The recent increase is against a 3.8% decline in employment during the last twelve months and by 4.4% since the recession began in late-2007.

It's not bad enough that the overall rate of unemployment has risen so quickly to its current level, but the experience of specific groups has been most severe. The unemployment rate for men over the last year has risen a record 4.7 percentage points to a near-record 10.6%. For teenage men, the 12-month increase to an unemployment rate of 26.2% lags the record increase only slightly while the increase in the adult male unemployment rate to 9.2% sets a new record, up 4.7 percentage points y/y. The pain for women has been every bit as great. The 3.0 point, twelve-month increase to an unemployment rate of 8.3% about matches the record pace. For teenage women, the speed of the rate's increase to 21.8% also is near the record. Finally, the adult women unemployment rate is up nearly three points to 7.0%, also near the record twelve-month increase reached back in 1975.

Schooling matters when it comes to employability, and the Labor Department measures individuals' level of education. For those with a college degree, the labor market has indeed weakened, but not as significantly as the overall figures have. For these individuals employment has declined 1.2% during the last year compared to 3.7% growth as recently as 2007. That weakening has doubled the unemployment rate, but only to 4.7%. For those with less than a high school diploma, the story is different and more dire. The unemployment rate more than doubled to 15.5% as employment fell 6.0% y/y. For high school graduates without college the unemployment rate also doubled to 15.5%. For those with at least some college the unemployment rate rate rose but to a lesser 8.0%. Back to school and back to work: community colleges and workforce development is a recent article from the Federal Reserve Bank of San Francisco and it is available here.

The job market figures also indicate great divergence by race and age. The white teenager unemployment rate jumped sharply last month to 21.4% from 16.7% for all of last year. Black teens also experienced joblessness, but at much higher level. Their level of unemployment touched 37.9% last month and employment over the last year fell 14.2% versus a lesser 10.7% decline amongst white teens. For adult whites, unemployment doubled to a below average 8.1% as employment fell 3.2% y/y while blacks' unemployment rose to 13.7%. Monetary policy and racial unemployment rates is a 2000 article from the Federal Reserve Bank of Atlanta and it can be found here.

Also notable during this recession is how much the unemployment rate has risen despite slower growth in the labor force. The labor force growth rate of 0.3% y/y through June is down from 1.4% during all of 2006. Drop-outs from the labor force, the so-called discouraged-workers, have been numerous and total 5.9 million, up 26% since the recession began. Had they remained in the labor force the unemployment rate would now stand at 13.3%, up 5.4 percentage points from the recession's start. That compares to the 4.5 percentage point increase in the official unemployment rate to 9.5%.

The labor department also keeps track of why individuals are not working full time, or so-called underemployment. At 6.5 million, the number of those putting in less than 34 hours per week due to slack work has more than doubled since the recession began. Those who could only find part-time work also has doubled to 2.2 million. Even the number of those who found a job and saw it end within a week rose by two-thirds during the last year to 211,000. In all, the jobless rate for the unemployed plus workers who are marginally attached plus those working part-time for economic reasons constitute 16.8% of the labor force, double the 2006-07 low. A dynamic analysis of recent changes in the rate of part-time employment is a 1991 working paper from the Federal Reserve Bank of Cleveland and it can be found here.

Industry employment trends are behind the relative severity of the employment patterns above. Factory sector jobs have fallen 14.0% since the recession began and construction jobs are down 17.1%. Even for the service sector, which typically is somewhat insulated from the full force behind cyclical downturns which drive employment lower, this time is different. Private service sector jobs are off 3.6% from their peak led by an 8.2% decline in professional & business service jobs. Jobs in the financial services group also have fallen a severe 5.9%, retail jobs are down 5.1% while government payrolls are up just slightly.

The Conference Board's Index of Leading Economic Indicators continued to suggest a pending economic recovery. The June composite index of leaders rose another 0.7% after gains of 1.3% (upwardly revised) and 1.0% during the prior two months. The combined 3.0% rise during those three months was the strongest since early 2002 while the index itself was at the highest level since last July. The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, orders for consumer goods and orders for capital goods.

For the third straight month, nearly three quarters of the ten components of the leading index increased with the largest positive contributions coming from a steeper yield curve, higher building permits and higher stock prices. The money supply and consumer expectations made slight negative contributions.

Again suggesting that the rate of decline in the economy is slowing were the coincident indicators. They fell 0.2%, about as they have for three consecutive months. These compare with monthly declines of 0.6%-to-1.1% dating back to September. The negative contributions from lower employment and production have eased. The remaining two component series actually rose during June, led by very slight gains in real disposable income and business sales. Over the last ten years there has been a 76% correlation between this y/y change and real GDP.

In a sign that excesses in the U.S. economy are diminishing, the lagging index fell for the sixth month in the last seven. The declines have been paced by a longer duration of unemployment, lower commercial and industrial loans and lower consumer installment credit. The ratio of coincident-to-lagging indicators (a measure of economic excess) rose m/m to the highest level since December.

The Conference Board figures are available in Haver's BCI database. Visit the Conference Board's site for coverage of leading indicator series from around the world.

Industrial orders in Italy made a slight bounce in May. French orders fell after a slight bounce in April. Neither shows any sign of upward momentum and the downward momentum has only just been trimmed if we compare 3-month growth rates to 12-month growth rates.

What is interesting is the very different performance in foreign orders as between Italy and France and Germany. Germany is showing some very substantial recovery in foreign-sourced orders. But it Italy, foreign order are falling at an accelerating pace through May. In France, foreign orders have shown a clear patterns of progress with the three-month growth rate reduced to an annual pace of -9.7% compared to -24% Yr/Yr.

Whatever progress is being experienced in Europe, it is irregular. Clearly some economies in the Zone are doing better than others despite the common currency regime - and that is true for sales overseas underlining the that exchange rates are not the only factor in the success of foreign sales efforts. The more variance there is across e-Zone countries in their respective economic performances, the more it will wear on the fragile e-Zone area where talk of integration is tough despite member countries efforts to continue to go it alone on fiscal policy. Europe still has a recession and still has some divisive political forces to weather. And yet more European ‘integration’ lies ahead.