San José, CA - In a sign that the economy is on the edge of another downturn, the Labor Department reported on Sept. 2 that there was no gain in jobs in August. Not counting last summer when there were large layoffs of temporary Census workers, this is the worst jobs report since February of 2010. The Labor Department also revised down the job gains for June and July, so that average job gain over the last three months was only 35,000 net new jobs per month. This is far below the 200,000 or so jobs that a normal recovery would be generating at this stage of an economic expansion.
Even worse, the average number of hours worked decreased by one-tenth of an hour. While this is a small number, multiplied by millions of workers, it means of loss of wages equivalent to losing some 300,000 jobs.
The unemployment rate stayed the same in August as compared to July; at 9.1%. One reason for this was that there was a large increase in the numbers of part-time workers who could not find full-time work because of the bad economy. The number of part-time workers has almost doubled since the start of the recession, from 4.5 million in December 2007 to 8.7 million in August. A broader measure of unemployment, that includes these part-time workers as well as discouraged workers who have given up looking for work, actually ticked up from 16.1% in July to 16.2% in August.
There was also a big increase in the unemployment rate for African Americans of almost a whole percentage point. The African American unemployment now stands at 16.7%, more than twice as high as the rate for non-Hispanic whites, which is 7.2%.
The official unemployment rate only counts those who are out of work and looking. Over the last four years the broadest measure of employment, the percentage of adults that are working, dropped from 62.7% to 58.2% in August. This measure usually falls during a recession, but has continued to fall since the official end of the recession two years ago.
The job market is caught in a vise between businesses that are not hiring and government spending cuts that are leading to job losses. Over the last two years businesses have cranked up production to where it is almost back to pre-recession levels. They have done this will seven million fewer workers. With their labor costs down, profits are way up and corporations are sitting more than a trillion dollars in cash that they are not spending.
But businesses are not going to hire more unless there is a pickup in spending. Consumers are not spending more because of high unemployment that limits income. The most widespread type of household wealth, housing, has been hit hard by the fall in home prices because of rising forced sales. With the number of home buyers who are behind on the payments rising in the April to June period, it is likely that home prices still have a way to fall with more forced sales in the future.
Exports of goods and services to other countries had been a bright spot in the economy, as the falling value of the U.S. dollar makes U.S. exports cheaper. But the economic slowdown and growing financial crisis in Europe have cut into exports, with exports falling in June, the latest month for which data is available. Job in manufacturing, an industry that has a large export market, fell for the first time in almost a year in August, with a loss of 3,000 jobs.
At the same time governments are cutting jobs. There have been almost 300,000 government jobs lost so far this year. State and local governments, especially schools, have been hardest hit by the bust in the housing market, which has cut into property tax revenues. With the end of the federal stimulus moneys going to state and local governments, they have had to cut even more. The recent ‘deficit reduction’ agreement promises to cut federal spending and jobs even more.
Both the Federal Reserve and the Obama administration are likely to try to stimulate the economy. But the most likely result is more of the easy money and piecemeal federal programs which haven’t been enough to get the economy back on track. More dramatic measures, such as a federal jobs program and allowing home buyers to reduce the mortgages through bankruptcy are needed to create more jobs, reduce foreclosures and create the income and spending needed to get the economy growing again.