Saturday, October 3, 2009

Job Losses Rise, Dampening Hopes for a Quick Recovery

The October 2, 2009 PBS Newshour report "Job Losses Rise, Dampening Hopes for a Quick Recovery" suggests that the unemployment rate may not capture the full extent of the labor market difficulties:
Employers shed 263,000 jobs in September, more than analysts expected, bringing the jobless rate to 9.8 percent. Economics columnist David Leonhardt and labor expert Jacob Kirkegaard look at the numbers.

JIM LEHRER: The U.S. economy shed more jobs in September as the unemployment rate kept climbing. Margaret Warner has our lead story report.

MARGARET WARNER: The nation's unemployment rate rose to 9.8 percent in September, the highest in 26 years. Employers cut 263,000 jobs, tens of thousands more than economists had predicted.

In testimony today, the Labor Department's Keith Hall described how far the jobs picture has slid since the recession's onset in December '07.

KEITH HALL, commissioner, Bureau of Labor Statistics: A total of 15.1 million persons were unemployed in September, twice the number at the start of the recession. The number of long-term unemployed rose to 5.4 million in September; this group has grown more than fourfold since the start of the recession.

MARGARET WARNER: The official rate is only part of the picture. The so-called hidden unemployment rate, which includes those who've settled for part- time work or given up looking altogether, has hit 17 percent.

President Obama noted today that the economy isn't losing jobs as fast as it was a year ago.

U.S. PRESIDENT BARACK OBAMA: But today's job report is a sobering reminder that progress comes in fits and starts and that we're going to need to grind out this recovery step by step. Employment is often the last thing to come back after a recession. That's what history shows us. But our task is to do everything we can possibly do to accelerate that process. And I want to let every single American know that I will not let up until those who are seeking work can find work.

MARGARET WARNER: In Fredericksburg, Virginia, where unemployment is slightly below the national average, some businesses are adding jobs. Tony Kala manages a hotel.

TONY KALA, Courtyard by Marriott: We have about 50 employees that we hired. That includes full time and part time. That is everybody's -- all local people that were hired from here, so that's definitely 50 jobs.

MARGARET WARNER: But elsewhere in town, the recession is still taking a toll. Vonda Merrill is an event planner.

VONDA MERRILL, Elle Events: I've seen a lot of businesses going out of business, and it's sad to see. A lot of the places that are downtown, you'll see a lot of "for rent" and "for lease" signs because a lot of businesses are just closing down.

MARGARET WARNER: Jobs numbers weren't the only bad news this week. Amid fears of a drop in consumer spending, factory orders fell in August by the largest amount in five months.

For a closer look now at today's numbers and the trends they suggest, we turn to David Leonhardt, economics columnist at the New York Times, and Jacob Kirkegaard, a labor economist and a fellow at the Peterson Institute for International Economics.

Definitely not a rosy picture today. Jacob Kirkegaard, let me stat with you. What did today's numbers tell you, not just about the picture now, but about the prospects that we're going to see a jobs recovery any time soon?

"Universally bad" numbers

JACOB KIRKEGAARD, Peterson Institute for International Economics: Well, I think, unfortunately, today's numbers were universally bad. I mean, there wasn't a single positive number there, so the short answer is, it pushes any sustained recovery further into the future and the prospects that the private-sector job creation, et cetera, consumer spending is going to take over from official stimulus spending, you know, zero interest rates, have just been pushed further out.
MARGARET WARNER: How do you see it?

DAVID LEONHARDT, New York Times: Yes, it's not a good report. I mean, what we were hoping coming into this report is that we were going to just see more progress every month and that maybe we were still a ways away from getting actual job growth, but that things would be getting better month after month.

And in terms of hours worked, in terms of job losses, we saw deterioration this past month. And so it does push further into the future the point at which anything might actually feel healthy.

MARGARET WARNER: In the jobs picture, because this was worse than August, not better?

DAVID LEONHARDT: That's right. And what's important to remember is, even if this had been better, we would still be a long ways away. I mean, we are still...

MARGARET WARNER: It would still be bleeding jobs at a pretty steady rate.

DAVID LEONHARDT: That's exactly right. Everyone expects we still have months more to go of job losses. And the unemployment rate will rise for months. And so the question is, how bad is it during that time? And how far off is the point at which jobs start growing again?

And each of the last few reports has basically giving us reason to wonder, well, maybe it's not going to go on as long as we had thought. And today was one step back.

MARGARET WARNER: The president today spoke of the historical relationship between economic growth and jobs growth and that they move -- one lags behind the other, but there's a pattern. Is it too soon to say or can you now say that, in fact, the jobs picture is lagging further behind the economic growth figures than usually, than historically? And if so, what does that tell you? What does that mean?

JACOB KIRKEGAARD: Oh, yes, I think we are now at a point where we can say, you know, what we economists like to say the Okun's law relationship, which is the relationship between how the unemployment rate moves and how the real GDP growth rates move has, in fact -- are now back to a scenario that we only saw in the mid-'70s. And what it suggests is, again, as David also said, I mean, we are moving to a -- being pushed further into the future.

But I just want to point out one other thing which I think is slightly understated, which is that not only are we still losing jobs, but we keep losing human capital, as well, because that's really what the long-term unemployment rate is. That's really skills depreciating. It's people not being able to follow through, you know, the new technologies, the new standard operating procedures in their jobs that they previously held.

MARGARET WARNER: You mean, meaning that -- the old maxim you think is true, that the longer you're unemployed, the harder it is to find work?

JACOB KIRKEGAARD: Absolutely. I mean, the real risk here is that the United States is entering this kind of vicious circle that, you know, quite frankly, some European countries saw in the early 1980s. And that's a very, very bleak diagnosis.

Double-digit unemployment

MARGARET WARNER: Time magazine had a cover story early in September in which it -- well, it raised it as a question, but was opining that we're entering some kind of new era of near-double-digit unemployment. I think it was, "Is double-digit unemployment here to stay?" Do you think we might be?
DAVID LEONHARDT: No. I mean, we might be, right? We don't want to be definite about the economy. But I think the idea that we're headed into some sort of long-term period with unemployment above 10 percent is fairly unlikely.

There are all kinds of bad dynamics right now, right? People lose their jobs; they spend less; and then more people lose their jobs. But that's true in every recession, right? It's always true. And yet we've always gotten out of previous recessions.

So our expectation should be that we're going to get out of this recession. And, in fact, we have a fair amount of stimulus money still coming down the pike in coming months. The natural ability of the economy to snap back should come into play here, as well.

So I'm not optimistic, but I don't think we're entering some sort of new era of double-digit unemployment.

MARGARET WARNER: So you don't think there's something structurally wrong?

DAVID LEONHARDT: Well, it depends what you mean by structurally. I don't think that we're going to end up stuck with 10 percent unemployment for some long period of time. I mean, it could be months, and that will feel very unpleasant, but I don't think that's the case.

I do worry about how quickly we're going to grow in the future. I mean, even during the expansion that we just had, from 2001 to 2007, economic growth was really mediocre and really disappointing. And so I don't think that we're necessarily going to come out of this into some sort of wonderful economic period. But I think the prospect of a long-term double-digit unemployment is by far one of the less likely scenarios here.

MARGARET WARNER: And how do you see that?

JACOB KIRKEGAARD: Well, I think, unfortunately -- and I'm probably going to take a slightly gloomier look than David, because I think we are seeing some very major structural issues at play here, because part of the story that we're seeing is this continuing shedding of jobs in the manufacturing sector.

I mean, you know, bad as that is, it's not a new story. And the general trend of the U.S. labor market has been this shift towards services sector employment. But the problem is that that story is really starting to fray a little, you know, at the edges, because we are starting to see very significant job losses also in the traditional kind of high-value-added, high-skilled services sector jobs that we basically thought was going to power the economy going forward.

So you could argue that, well, actually if this happens in the financial sector, well, maybe some people might not think that's a bad idea. But the question remains is, it's just not a clear move into the service sector anymore.

Building a 21st century economy

MARGARET WARNER: The president said today that -- he said, basically -- talked about building a 21st century economy where people can get the skills and education they need to compete for the jobs of the future won't happen overnight. He seemed to be suggesting that the mix of jobs and businesses and industries we have now isn't enough for robust growth. Do you think that's what he was suggesting? And do you think that's correct?

DAVID LEONHARDT: He's talked about this idea of building a new foundation that we want, an economy that isn't reliant on bubbles, and we do want that. And the problem is that takes a while.

It probably comes down more than anything to the skills of the workforce. And we have been having a real slowdown in the growth of the educational attainment of this population. And that's really bad.

And so we can't snap our fingers and overnight get to a more skilled, more educated population. And businesses can't snap their fingers and make the investments that are needed for long-term growth.

So the one reason to have some hope is that the really good things in the economy you often don't see coming. If we were sitting here in 1992 or 1993 talking about that jobless recovery, none of us would have been saying, "You know what? In a few years, we're going to have this great thing called the Internet."

And I'm not saying we're going have something new like that. I don't know. But I do think that, if we were going to have it, we wouldn't necessarily know that we would now.

MARGARET WARNER: Very briefly, do you think it will take some new, new thing?

JACOB KIRKEGAARD: Yes, absolutely. I mean, no matter what we do -- I mean, and personally I don't think it will be green jobs, because I think that story, unfortunately, has been quite overblown, as well.

MARGARET WARNER: Well, gloomy and gloomier. Jacob Kirkegaard, David Leonhardt, thank you.

JIM LEHRER: You can read what our economics correspondent Paul Solman thinks about today's numbers on our Web site, And on "NewsHour Extra," there's a lesson plan for teachers about the undercounted unemployed.

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