This last spring, I posted on how I thought that there were basically two recessions going on. That is that there were two sectors that made up a disproportionate share of the employment losses. From that post:
What I've done here is calculate what it would look if employment shrinkage had been spread equally across economic sectors weighting for their percent of employment.
For example, if employment shrinkage had been distributed equally 275,862 construction and mining jobs would have been lost. In reality over a million jobs disappeared in this sector. In contrast, if employment shrinkage had been distributed equally 600,984 education and health jobs would have been lost across the country. In reality this sector gained 487,900 jobs.
Same contrast with manufacturing and government jobs. If employment shrinkage had been distributed equally 467,980 manufacturing jobs would have been lost. In reality over a million jobs disappeared in this sector. In contrast, if employment shrinkage had been distributed equally 758,984 government jobs would have been lost across the country. In reality this sector gained 487,900 jobs.
What I plan to do in this post is a sort of update on the one I did in the spring.
First, the structure of employment is continuing to change. With these numbers remember that a 0.1% of employment is over 139,000 jobs. No small change.
As can be seen, traditional blue collar sectors (Manufacturing, Construction, Trade et al) continue shrink relative to the new service sector (Leisure and other services). White collar employment as a whole (Info,Financial, Professional, Education and Health, Government) is up, however private white collar employment (Info,Financial, Professional) is down, and growth is being driven by public employment (Education and Health, Government). Given the growing fiscal problems at the federal, and in particular state and local government, that should be a sign for concern. On the up side, a very smart policy of avoiding putting public employment to the knife probably helped avoid a more serious recession (aka a depression).
Another aspect of the employment shrinkage between March and August of this year has been that Manufacturing and Construction continue to be hit disproportionately hard. Employment shrinkage in these sectors is over 3 times what we would expect if all sectors were equally affected.
Overall between the March and August of this year employment shrunk by 1,977,400. On a monthly basis that means that employment shrank by 329,567. In comparison, in the 16 months between the start of the recession and March 2009, employment shrank by 4,610,100. Or on a monthly basis 288,131.
Another way to look at this is compare changes in the employment level to the size of the labor force. In the 16 months between the start of the recession and March of this year, employment fell by 4,610,100, on the other hand the labor force actually grew by 1,368,300. Obviously this means that unemployment is going to rise, because there are less jobs available, and more people looking for them.
Compare this to the six months between March and August. Employment fell by 1,977,400, but the labor force also shrank by 523,900. Less jobs, but also less people looking for them. So the unemployment rate falls.
The question that needs to be asked is why these people are leaving the labor force. If they are so discouraged that they've just given up hope of ever finding a job, then they are arguably still unemployed, but they just aren't counted.
If we hold the labor force (50 states+DC-Territories) constant, and then show the effect of employment shrinkage on the unemployment level, then unemployment increases by 0.3 points from 9.67% to 9.97%. In short, the shrinking labor force conceals around 3-4% of total unemployment.
The lesson, beware of the raw unemployment rate. The unexpected is at work here concealing a portion of the unemployed from view.