Friday, August 5, 2011

Unemployment - July 2011: Less workers = Less Unemployment

The July 2011 employment  report came in at a net increase of 117,000 jobs after a decrease of 37,000 government jobs from an increase of 154,000 private sector jobs.  Consensus had been for an increase of 75,000.  The ADP private employer survey had shown an increase of 114,000 earlier in the week.  Given the market correction this week, it was a welcome positive however weak it is.  The unemployment rate decline one tenth of a percent to 9.1%.  The total unemployed including discouraged workers declined one tenth to 16.1%.  If one used the 1980's calculation (the Shadow Statistics chart in the link changes monthly) for total unemployed including discouraged, it would have been approximately 22.7% rather than 16.1%.

The employment population ratio fell to 58.1% which is the lowest since August 1983 (also that low in November 1973 and March 1953) as can be seen in the third chart here at dshort.com.  The participation rate of national available workforce declined from 64.1% to 63.9%, which is also the lowest since the early 1980's as shown in the first chart here from calculatedrisk.com or in the Calculated Risk employment charts gallery here.

The unemployment rate is down not because there has been an increase in jobs, but because the population who could work has declined and the number of available workers participating from the population has declined.  Less workers equals less unemployed being reported.  6.2 million Americans have been unemployed for more than 6 months and as the 99 week unemployment benefits keep expiring more and more unemployed are no longer even counted and they drop into statistical oblivion.  8.4 million Americans are involuntary part time workers, because they cannot get full time work.  The official 16.1% total unemployed including discouraged equates to 24,800,240 Americans unemployed; the old 1980's calculation equates to 34,750,953 Americans unemployed.

If one were to reduce the official unemployment rate of 9.1% (13,931,000 Americans) to an economic concept of full employment at 5% (7,654,395 Americans) at 117,000 jobs increase per month, it would take 74 years and 9 months, because it takes 110,000 (between 100,000 to 150,000 but 110,000 should be very close) new jobs per month just to keep up with the population increase.  If 250,000 jobs were added each month, it would take 3 years and 9 months.  If there was economic growth consistent with strengthening recovery, job growth should be at least 350,000 per month and it would take 2 years and 2 months to reach 5% unemployment.  A truly strong recovery would be over 400,000 to 450,000 jobs per month and at 450,000, it would take 1 year and 6 months.


But as unemployment starts to abate, more and more discouraged workers and workers, who have exhausted all extended benefits, no longer counted will start looking again for work and theoretically re-enter the available worker population.  To the official total unemployed including discouraged workers to only 5% unemployed (economic full employment) at 250,000/month it would take11 years and 1 month; at 350,000 it would take 6 years and 5 months; at 450,000 it would take 4 years and 6 months to get to 5% unemployment.

Using the old 1980's calculation for total unemployed including discouraged workers, at 250,000 it would take 16 years and 11 months; at 350,000 it would take 9 years and 9 months; at 450,000 it would take 7 years to reach 5% unemployment.

If you are over 50 years old and unemployed, it becomes even more difficult to obtain new work of any kind much less work consistent with experience and ability.  Since 2008, each year has gotten worse for those over 50.  By December 2010, unemployed workers 55-64 years old who had been unemployed for more than a year composed 40% of the total unemployed for that age group and for the 65 years and older group unemployed approximately 43% of that group had been unemployed for more than a year.  And there are those help wanted ads which have started to appear that will consider only those currently employed.  During the Depression ads, which are illegal now, included ages discriminating against older workers; now, discriminatory employers just do not interview older workers.

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