Behind The Numbers: Workforce Dropouts

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March Unemployment:
The Rest Of The Story

Friday’s Bureau of Labor Statistics report on unemployment and jobs in March confirms that the economy continues to spiral downward. But the news reports only tell a small part of the story. The other part of the story is who is counted and who is not counted in the unemployment figure.
Read Charles McMillion's analysis » [1]

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Today’s Bureau of Labor Statistics report on unemployment and jobs in March confirms that the economy continues to spiral downward as deeply stressed households face worsening employment and financial conditions.

Media love to report the unemployment rate but rarely explain what it means. The unemployment rate in March surged to 8.5 percent, from 8.1 percent in February and 5.1 percent in March 2008. This is the worst unemployment rate since October 1983 – and the worst for a Democratic president since FDR. But that only tells a small part of the story.

The other part of the story is who is counted and who is not counted in the unemployment figure. Today’s report shows that another 166,000 people vanished from the labor force in March. That is, they indicated when asked that they were neither working nor looking for work. March was the fifth month out of the last seven months that more people dropped out of the labor force than joined. Indeed, there were fewer people counted in the labor force in March than there were last May.

It is normal for people to be discouraged during a recession – thereby causing the labor force to grow more slowly than the usual 1.5 percent annual growth of the past 30 years, but the current meager 0.1 percent year over year growth is quite unusual. Obviously, if fewer people were dropping out of the labor force, the unemployment rate would be far higher.

The BLS’ most inclusive measure of under-utilized labor (the U-6 unemployment rate) soared to 15.6 percent in March from 14.8 percent in February and 9.1 percent in March 2008.

The BLS’ survey of non-farm business establishments shows 663,000 jobs lost in March, about what was expected. But it also shows that there were 86,000 fewer jobs in January and February than previously estimated. Don’t be misled by reports that the loss of 651,000 jobs in February was unchanged – the downward revision was for January, which now shows 741,000 jobs lost.

The bottom line is today’s report shows that in March there were 749,000 fewer jobs than was previously reported for February and 4.8 million fewer jobs year over year.

By the way, today’s further downward revision to the January jobs data means that the awful jobs record during the Bush administration was even worse than previously believed, creating only 159,000 (0.1 percent) private sector jobs in eight years – less than 20,000 per year. This, despite $5 trillion in new federal debt and almost $7 trillion in new household debt – over $74 million of mortgage and war debts per private sector job added.

Today’s report shows virtually every economic sector losing jobs in March, including state and local governments because of cuts to public education. Indeed, the largest downward revision to the January and February data were for local government’s public schools, as budget cuts now take effect on what had been a consistent engine of current job growth as well as hope for the future.

Now, the only sector that is still adding significant numbers of jobs is the deeply dysfunctional, mostly low-paying, private health care bureaucracy that is bankrupting many other businesses as well as government at the local, state and federal levels. Private health care added another 14,000 jobs in March and has added 327,000 more jobs year over year. Whereas every state has lost manufacturing jobs year over year to February, every state has added jobs in private health/education.

Finally, because of this structure of changes in the workforce, with deeper losses in higher-wage, longer-workweek industries than in lower-wage/shorter work-week services industries, the average paid workweek fell to an all-time record low of just 33.2 hours per week. Some employers, of course, are also cutting hours in an effort to preserve jobs. The result is that even with a slight gain in nominal average wages per hour, the average nominal wages per week fell in March adding further pressures to already deeply stressed household finances.

Also, today the Institute for Supply Management released their March report for non-manufacturing businesses. The report shows a further decline in March to 40.8 in March from 41.6 in February, with the decline in new orders and deflationary price pressures both worsening sharply.

Today’s reports seem to confirm that despite volatility in some indicators, the economy continues to sink deeper into the worst downturn since the 1930s with no end yet in sight.