The above chart shows what I refer to as the “jobs gap” that has been created since December 2007. The jobs gap includes all nonfarm payroll losses and the lack of new job creation. In order to just keep the U.S. unemployment level constant approximately 125,000 jobs must be created each month. The above chart layers the lack of new job creation on top (or bottom) of the nonfarm payroll losses to give a picture of the true employment problem the U.S. is facing. The U.S. is now faced with a “jobs gap” that totals just over 9 million. In order to return to the pre-recession unemployment rate a total of 9 million jobs would have to be created immediately.
Here’s another way to look at the issue. In order for the U.S. to return to the pre-recession jobs situation in the next two years a total of 12 million jobs will need to be created. 12 million = the current nine million gap + the three million new jobs that would need to be created over the next 24 months to keep pace with new individuals entering the labor force. Given these numbers I believe the U.S. unemployment rate will remain elevated for many years to come (even long after we start to see improvement in the employment situation).
Data source:
U.S. Bureau of Labor Statistics
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As the above chart shows total nonfarm payroll losses in the U.S. have topped 6.6 million since December 2007. This leaves us with a major ”jobs gap” to fill in order to return to pre-recession employment levels. Check tomorrow’s post to see why the above chart only represents a portion of the total ”jobs gap” that needs to be filled.
Data source:
U.S. Bureau of Labor Statistics
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Getting better, but still bad.
Data source:
U.S. Bureau of Labor Statistics
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While the U.S. jobs data released on Friday was an improvement over prior months it was not as rosey as many claimed. The offical unemployment rate declined from 9.5% in June to 9.4% in July, but this is misleading. Over the next several days I will post charts that will help give a better perspective on the jobs picture in the U.S.
The first chart above shows the number of total unemployed persons in the U.S. over the past few months. If you just look at this chart, you again would be mislead. The chart clearly shows that the number of unemployed persons in the U.S. declined in July. Good news, right? I will answer that question with another question. What happened to the people that are no longer unemployed? Did they find jobs, or did they fall out of the offical labor force? I’m thinking the later. Why? Look at the second chart.
The second chart shows the total number of employed persons in the U.S. If the total number of unemployed persons declined in July, wouldn’t you expect the total number of employed persons to have increased? Yes. But, it did not. What happened was the offical labor force shrank. One way this happens is when people have been unemployed for so long that they stop looking for work. The government then just excludes these persons from the labor force. They are not employed or unemployed - just out of the labor market.
Tomorrow I will have a chart on payroll numbers.
Data source:
U.S. Bureau of Labor Statistics
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Each state administers its own unemployment insurance benefits program. Each state also has its own unemployment insurance trust fund, and some are in better shape than others. Above is a chart of the states that are now relying on loans from the Federal Unemployment Account to provide for continued unemployment benefits to the qualifing unemployed in their state. In the past month: 1) Illinois began to take trust fund loans, and 2) the total amount of loans increased by $2.45 billion. Total loans now amount to over $12.8 billion.
Data source:
U.S. Department of Labor, Employment & Training Administration
National Conference of State Legislatures
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The above chart gives a view of the top 10 performing U.S. job markets over the past 12 months as measured by the year-over-year change in the unemployment rate. The measure is for the year-over-year period from June 2008 until June 2009. For example, Bismark, North Dakota had an unemployment rate of 3.2% for June 2008 and a 3.8% unemployment rate in June 2009 for a .6% increase (or 60 basis points).
Data source:
U.S. Bureau of Labor Statistics
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The above chart is of the 10 worst job markets in the U.S as measured by the year-0ver-year change in the unemployment rate. The measure is from June 2008 to June 2009. For example, Bend, Oregon had an unemployment rate of 6.8% in June 2008, and in June 2009 had an unemployment rate of 14.8%. So the year-over-year change in its unemployment rate is 8% (or 800 basis points).
Data source:
U.S. Bureau of Labor Statistics
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The above chart shows a historical view of the number of MSAs that have an unemployment rate of 10% or greater. As of June 2009, 144 MSAs fell into this category.
Source data:
U.S. Bureau of Labor Statistics
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The above chart shows the unemployment rate by state for June 2009. The 15 states with an unemployment rate above 10% are shown in red. Michigan has the highest unemployment rate in the country at 15.2%. Remember this is the offical unemployment data which understates the real unemployment picture. For example, the offical unemployment numbers don’t include individuals that the government believes have dropped out of the labor force (even if they still want a job), or persons working part time for economic reasons (the only type of work they can find). Most data I have seen on a national level would lead me to believe that an official unemployment rate between 10%-15% really means that at least 20% of the labor force is either unemployed or underemployed.
Data source:
U.S. Bureau of Labor Statistics
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The above chart shows each state unemployment insurance trust fund as a percentage of total wages in that state. The data is as of the end of the first quarter 2009. As you can see from yesterday’s post, as of the beginning of the third quarter of 2009, 15 states had loans from the federal government. So, it is obvious that the numbers in the above chart have declined significantly since the first quarter.
It is also worth noting that there is a very wide disparity between the health of the state trust funds.
Data source:
U.S. Department of Labor
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Each state administers its own unemployment insurance benefits program. Each state also has its own unemployment insurance trust fund, and some are in better shape than others. Above is a chart of the states that are now relying on loans from the Federal Unemployment Account to provide for continued unemployment benefits to the qualifing unemployed in their state. As of a year ago, only Michigan was borrowing from the Federal Unemployment Account. Total loans now amount to over $10 billion.
Data source:
U.S. Department of Labor, Employment & Training Administration
National Conference of State Legislatures
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The above chart is a total of all state unemployment insurance trust funds. Data for the second quarter is not yet out, and it will undoubtedly show another steep decline. Some states have already depleted their trust funds. Tomorrow, I will have a chart on states that have trust fund loans from the federal government.
Data source:
U.S. Department of Labor
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The above chart shows the average unemployment insurance benefit by state paid in May 2009. As you can see the average can vary significantly by state. Also, what is obvious is that the average benefit is not meant to be a wage replacement (far too low). Remember, unemployment benefits are considered taxable income too.
Data source:
U.S. Department of Labor
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As you have seen from the prior few posts, unemployment insurance claims (both initial and continued) are near record levels. What is very disturbing is that this is occuring at the same time the exhaustion rate of unemployment benefits hits record highs.
The way the Bureau of Labor Statistics calculates the exhaustion rate needs a little explanation. It takes a 12-month average of the number of final payments and divides that by a 12-month average of the number of first payments. The 12-month average period for which the first payments are counted lags the 12-month period for which the final payments are counted by 6 months. For example, the exhaustion rate for June 2008 equals the number of final payments from July 2007 through June 2008 divided by the number of first payments from January 2007 through December 2007.
The 12-month average period helps smooth out monthly bumps in the numbers. The lag helps ensure the data on persons exhausting their benefits is compared with the appropriate data from when they received their first payments (because it usually takes about 6 months to exhaust benefits). Without the lag, first time data could skew the exhaustion rate calculation. For example, a big decline in first time claims would make the exhaustion rate increase even if the number of persons exhausting their benefits that month didn’t change.
Data source:
U.S. Department of Labor
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As of June 13, 2009, the number of Americans filing for continued unemployment insurance weekly claims hit 6,738,000 (on a seasonally adjusted basis). This is the Labor Department’s advanced reading which will likely be revised.
Data source:
U.S. Department of Labor
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