June 10, 2008
ECONOMIC NEWS: The Unemployment Rate Moves Sharply Up
The unemployment rate jumps to 5.5 percent. On Friday June 6th, the Bureau of Labor Statistics (BLS) reported that the unemployment rate in May increased to 5.5 percent, a full 0.5 points higher than in April and a full percentage point higher than in May 2007. Over 860,000 persons were added to the unemployment rolls in May alone, the largest one month increase since January 1975, when the U.S. was in the midst of a recession. The sharp jump in May mirrors labor market behavior that occurred prior to and during the two previous recessions. (See Chart)
Goods producing sectors in decline, service sector flat. The BLS data also show that most job losses were concentrated in the construction and manufacturing sectors, with those two sectors shedding a total of 60,000 jobs in May. While employment in the service sector was essentially flat, not all service subsectors were untouched – retail trade lost 27,000 jobs, and professional and business services shed 39,000 jobs. Productivity up on cutbacks in hours worked. The U.S. Department of Labor revised up its measure of productivity (output per hour of all persons), showing an annualized increase of 2.6 percent in the first quarter of 2008. This increase is due largely to a 1.8 percent cutback in the number of hours worked, reflecting the same job market weakness mentioned above. Manufacturing sector productivity was reasonably high, increasing at a 3.6 percent annual rate, but this too reflected a 4.7 percent decrease in the number of hours worked.
Productivity up on cutbacks in hours worked. The U.S. Department of Labor revised up its measure of productivity (output per hour of all persons), showing an annualized increase of 2.6 percent in the first quarter of 2008. This increase is due largely to a 1.8 percent cutback in the number of hours worked, reflecting the same job market weakness mentioned above. Manufacturing sector productivity was reasonably high, increasing at a 3.6 percent annual rate, but this too reflected a 4.7 percent decrease in the number of hours worked.
IN FOCUS: May Employment Numbers Show Fifth Straight Month of Job Losses
Last week, the Bureau of Labor Statistics (BLS) released data on the employment situation in May, showing a net loss of 49,000 jobs for the month. At the same time, BLS revised its April and March employment reports, showing that the employment situation was worse than previously thought. These revisions showed an additional loss of 8,000 jobs in April and 5,000 jobs in March, bringing the total number of jobs lost by the U.S. economy in 2008 to 324,000. (See Snapshot)
As expected, the construction and manufacturing sectors continue to lose jobs. Construction lost 34,000 jobs last month, and has experienced a reduction of 475,000 jobs since its peak in September 2006. Employment in manufacturing continues to decline—in May, this sector lost 26,000 jobs, bringing its 2008 total job losses to more than 200,000. However, job losses have spread throughout the economy and are no longer found solely in the housing-related sectors. For example, in May, the temporary help sector, often a leading indicator of employer’s willingness to hire, shed nearly 30,000 jobs. Temporary jobs have declined by 114,000 this year. Employment in retail trade fell by 27,100 jobs in May. Since peaking in March 2007, this industry has lost 184,300 jobs.
For the first time since summer 2003, the nonfarm sector showed job losses for the fifth consecutive month. These labor market outcomes are consistent with a developing downturn, since the economy has typically added about 150,000 to 200,000 jobs each month during recent expansions.
The unemployment rate surged from 5.0 percent to 5.5 percent in May, representing the largest single-month increase since 1986. While rising unemployment is affecting everyone, it is especially pronounced for certain demographic groups, most notably African Americans, teens, and women who are the sole breadwinners in their families. African Americans experienced a 9.7 percent unemployment rate in May, up from 8.4 percent one year ago. Teen unemployment in May was 18.7 percent, more than three percentage points higher than in April.
The teen unemployment rate is particularly high among African Americans, at 32.3 percent. Female breadwinners saw their unemployment rate rise to 6.9 percent in May, an increase of 0.6 percentage points from one year ago. Since these are sole earners, their families are extremely vulnerable to job losses. Overall, the number of unemployed persons grew by 861,000, bringing the total of unemployed Americans to 8.5 million.
The BLS data also reveal that of the total unemployed in May 2008, 18.3 percent of them, or 1.5 million were “long-term unemployed.” Workers are considered part of this category if they have been out of work and searching for a new job for at least six months. These individuals have exhausted the limit for receiving regular unemployment insurance (UI) benefits. In fact, in the first quarter of 2008, more than 40 percent of the unemployed workers in eleven states (FL, NJ, CA, AZ, NM, NE, NC, IN, CO, RI, and LA), the District of Columbia, and Puerto Rico and the Virgin Islands have exhausted their regular UI benefits. Friday's jobs report is a strong argument for Congress to extend unemployment insurance for hard-hit workers to address the systemic problems dragging down our economy.
THE WEEK AHEAD
|Monday, June 9||Pending Home Sales (April 2008)|
|Tuesday, June 10||Release of Federal Reseave Beige Book|
|Wednesday, June 11||JEC Hearing - FIGHT NOW PAY LATER:|
|THE FUTURE COSTS OF THE IRAQ WAR|
|Room 106, Dirksen Senate Office Building 10 am|
|Retail Sales (May 2008)|
|Business Inventories (April 2008)|
|Thursday, June 13||Consumer Price Index (May 2008)|
THE ECONOMY AT A GLANCE
|Economic Activity||May||Apr||Mar||Feb||Q1 2008||Q4 2007||Q3 2007||Q2 2007||2007||2006||2005|
|Real GDP (% growth)||0.9||0.6||4.9||3.8||2.2||2.9||3.1|
|Unemployment (% of Labor Force)||5.5||5.0||5.1||4.8||4.9||4.8||4.7||4.5||4.6||4.6||5.1|
|Labor Productivity Growth (%)||2.6||1.8||6.0||2.7||1.8||1.0||1.9|
|Labor Compensation Growth (%)||3.0||3.4||3.1||3.5||3.4||3.1||3.3|
|CPI-U Inflation Growth (%)||n.a.||2.4||3.7||0.0||4.3||5.0||2.8||4.6||2.9||3.2||3.4|
|Core CPI-U Inflation Growth (%)||n.a.||1.2||2.4||0.0||2.5||2.5||2.5||2.0||2.3||2.5||2.2|