Unemployment Stable, but Construction and Manufacturing Continue to Shed Jobs

May 02, 2008

May 2, 2008 (Jobs Byte)

By Dean Baker

“Health care employment has grown at a 3.1 percent annual rate this year.”

The unemployment rate edged down to 5.0 in April, even as the establishment survey showed the economy losing another 20,000 jobs. The decline was driven by a loss of 61,000 jobs in construction and 46,000 in manufacturing. The private sector lost 29,000 jobs, the fifth consecutive month of job loss.

The employment situation in construction continues to worsen, with losses in residential now being compounded by declining employment in the non-residential sector as well. It is likely that job loss in this sector had been understated at the start of the housing downturn, since there were many undocumented workers in the industry who never showed up in the data. With most undocumented workers having already lost their jobs, the reported job loss probably corresponds more closely to the actual job loss. The pace of job loss in manufacturing is also striking. The sector has lost 198,000 jobs since November, or 1.4 percent of total employment. The auto sector has accounted for 64,000 of the lost jobs.

The retail sector is also shedding jobs at a rapid pace, losing 26,800 jobs in April and 130,000 since November. With several major retail chains having announced plans for store closings and others scaling back expansion plans, this decline is likely to continue. The temporary help sector also continues to lose jobs at a rapid pace, with employment falling by 9,300 in April. Since November, the sector has lost 80,000 jobs or 3.1 percent of total employment. Insofar as employment in this sector is a harbinger of growth in permanent employment, this is not good news.

Health care and restaurants continue to be the most dynamic job creators, adding 36,900 and 18,000 jobs, respectively. The health care sector has now added 102,000 jobs since January, a 3.1 percent annual growth rate in a period in which the economy has been losing jobs. The increase in restaurant employment is likely a result of a faulty imputation for jobs in new firms. The establishment survey shows employment in restaurants growing by 56,000 since December (0.6 percent), even though the Census Department shows nominal spending falling by 0.2 percent from December to March. Real spending was down by close to 2.0 percent over this period.

The picture in the household survey was markedly brighter than in the establishment data, but there were peculiarities that call this picture into question. Most notably, the employment gain was hugely concentrated among younger workers. Employment among workers aged 20-24 rose by 104,000 in April, or 0.8 percent. Employment for workers 18-19 rose by 269,000, an incredible 7.5 percent one-month increase. Jumps of this magnitude are extraordinary. Problems with student loans could be pushing more young people to find jobs, but this is likely a seasonal adjustment issue. Employment for workers over age 25 barely changed and the employment to population ratio for white men fell by 0.3 percentage points to its lowest level since September of 2004.

Other data in survey were mixed. The percentage of unemployment due to job leavers rose by 1.1 pp, but the average and median duration of unemployment spells rose, as did the share of long-term unemployed. The number of people involuntarily working part-time rose by 328,000 to 5,125,000, the highest level since the question was changed in 1994. There was also a modest decline in the length of the average workweek in the establishment data, suggesting that shorter hours may be a growing problem.

The annual rate of wage growth over the quarter was 3.6 percent, almost identical to 3.4 percent rate over the last year. Wages in retail trade are a notable laggard here, with wage growth of just 1.5 percent over the last year and average growth of less than 1.3 percent over the last two years.

It seems virtually certain that the economy will continue to lose jobs in the months ahead and likely at a more rapid pace than shown in this report. The job declines in construction and manufacturing are not about to stop, and may accelerate in the retail sector, and employment growth in health care likely to slow 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 morgavan [at] cepr [dot] net.

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