October Job Loss Brings Two-Month Total to 524,000
The broad U-6 measure of labor market slack is at its highest level since January 1994.
The loss of 240,000 jobs in October, coupled with a job loss figure for September that was sharply revised upward to 284,000, brought the two-month decline to 524,000. The private sector lost 263,000 jobs in October, for a two-month total of 506,000. This is the sort of sharp decline in employment that is typical for recessions. The unemployment rate jumped to 6.5 percent in October, the highest rate since March of 1994.
Almost all the news in this report was negative. In the addition to the sharp rise in unemployment, there was also a sharp increase in the number of people involuntarily working part-time. This rose by 544,000 in October, bringing the two-month rise to a record 844,000. The U-6 index, the broadest measure of labor market slack, rose to 11.8 percent, tying the rate for January 1994 (when the measure was first established) as the highest on record.
There were also big increases in all the measures of unemployment duration. The percentage of long-term unemployed (more than 26 weeks) rose by 1.2 percentage points to 22.3 percent. It had been 17.9 percent a year ago. The average duration of unemployment increased by 1.3 weeks to 19.7 weeks. The two-month rise of 2.3 weeks in average duration is the sharpest increase ever.
Younger workers continue to be hardest hit as employment is still rising among workers over age 55. Employment of workers between the ages 35 and 44 fell by 2.6 percent over the last year. It fell by 2.0 percent for workers age 20 to 24, and it dropped 1.5 percent for workers age 25 to 34.
There is virtually no positive news in the establishment survey as almost every major sector lost jobs. Construction lost 49,000 jobs in October, as both residential and non-residential construction are now shedding workers at a rapid rate. The two non-residential categories together lost 17,300 jobs in October after losing 19,200 jobs in September. With considerable overbuilding in the non-residential sector, this rate of job loss is likely to continue well into 2009.
Manufacturing lost 90,000 jobs in October, although this number was inflated by the 27,000 workers on strike at Boeing. Even after correcting for these workers, the sector has still lost 180,000 jobs over the last three months and 490,000 jobs over the last year (3.6 percent of total employment). With the recent run-up in the dollar hurting trade, it is unlikely that this job loss will be reversed any time soon.
Retail trade lost 38,100 jobs, with auto dealers accounting for 20,300 of the lost jobs. Employment in car dealers is only down by 7.0 percent from year ago levels. Much sharper declines are likely as employment adjusts to the fall in car sales.
Employment services shed 50,800 jobs in October, bringing the drop over the last year to 367,600 (10.3 percent). This is an indication that employers expect to need fewer workers in the near future. The government sector added 23,000 jobs in October, but this followed a sharp downward revision of 60,000 to the job growth numbers for the prior two months. Most of the revision was attributable to a drop of 49,900 in the number of jobs reported in local government education.
Health care was the one sector that continues to add jobs at a healthy rate, adding 26,000 jobs in October. This sector has added 347,800 jobs over the last year.
In addition to the decline in employment, the number of hours worked appears to be edging downward with the average workweek averaging 33.6 hours in the last two months, compared to 33.7 hours the prior four months, and 33.8 hours a year. The index of aggregate weekly hours is almost a full percent below its July level.
With energy prices falling, nominal wage growth is now modestly outpacing inflation, having risen at a 3.3 percent annual rate over the last quarter. But it is clear that workers’ buying power will be dropping due to the fall in employment. With the loss of housing equity putting a lid on borrowing, consumption is virtually certain to fall much further in the months ahead.
Dean Baker is the Co-director of the Center for Economic and Policy Research. CEPR's Jobs Byte is published each month upon release of the Bureau of Labor Statistics' employment report. For more information or to subscribe by fax or email contact CEPR at 202-293-5380 ext. 102, or warner [at] cepr [dot] net.