At a time of persistent economic weakness, April’s jobs report represents an ongoing disaster

By Heidi Shierholz
EPI, May 3, 2013

The jobs report released today by the Bureau of Labor Statistics showed that the labor market added 165,000 jobs in April and that the unemployment rate hardly budged, moving just six-hundredths of a percentage point, from 7.57 percent to 7.51 percent. This is a classic “hold-steady” report—there were enough jobs to keep the unemployment rate stable, but not much more. In good times this would be fine, but at a time of persistent economic weakness, it represents an ongoing disaster. We need 8.7 million jobs to get back to a healthy labor market. The average growth rate so far in 2013 is 196,000 jobs a month; at that rate, it will take more than five years to return to the prerecession unemployment rate.

New grads this spring will face grim labor market

This time of year, attention often turns toward the job prospects of new graduates. The labor market the Class of 2013 will face is extremely weak. For example, over the last 12 months, the unemployment rate among workers under age 25 who have a bachelor’s degree or more and are not enrolled in further schooling averaged 8.2 percent (see the figure). This is a slight improvement from the average at this time last year, 8.5 percent, but is still much higher than the 2007 average of 5.4 percent.

For detailed information on the employment and wage prospects of the Class of 2013 (both high school and college graduates), see this EPI analysis. It is worth noting that sustained high unemployment among young college graduates underscores that today’s unemployment crisis does not stem from workers lacking adequate education or skills. Rather, a lack of demand for goods and services makes it unnecessary for employers to significantly ramp up hiring.

FIGURE A

Unemployment rate of college graduates, under age 25, who aren’t enrolled in school, January 1991–April 2013

Unemployment rate of college graduates, under age 25, who aren’t enrolled in school, January 1991–April 2013

* The unemployment rate is a 12-month moving average, as data are not seasonally adjusted.

Source: Author’s analysis of Current Population Survey public data series

Labor force participation rate holds at its lowest point of the downturn

Labor force participation held steady in April at 63.3 percent, its low of the downturn and far below its prerecession rate of 66.0 percent in December 2007. Even though we are adding jobs, the labor force participation rate is not improving because it is still a very difficult environment for job seekers, with unemployment well over 7 percent, underemployment at 13.9 percent, and 37.4 percent of job seekers unemployed for more than six months. Such an environment does not draw workers in. The workers who are out of the labor force due to weak job opportunities will not join the labor force in large numbers until job prospects are strong enough that they won’t face months of fruitless job search.

For more information on the “missing workers”—workers who are not in the labor force but who would be if job opportunities were strong—see this blog post, which shows that the majority of this country’s more than 4 million missing workers are “prime-age” workers (age 25–54), particularly prime-age men.

Hours drop, wage growth weak

The length of the average workweek for private-sector workers dropped from 34.6 to 34.4 hours, a substantial drop that is not a good sign for future hiring. It should be emphasized that because this counts only private-sector workers, it does not include hours declines from furloughs of federal workers due to the sequester (the hours measures in the establishment survey are just for private-sector workers). In the household survey, the number of “involuntary” part-time workers—part-time workers who want a full-time schedule—increased by 278,000, almost fully reversing the March decline.

The drop in hours, combined with weak hourly wage growth (average hourly wages for all private-sector workers increased by 4 cents in April, a 2.0 percent annualized rate) means that weekly wages dropped substantially, by $3.39, a 4.8 percent annualized decline.

Public-sector losses continue to hamper the recovery

The public sector continues to shed jobs, losing 11,000 in April (8,000 federal, 3,000 state and local). Since the recovery began in June 2009, the public sector has lost nearly three-quarters of a million jobs (741,000). These losses are an enormous drain on the recovery.

Temporary help service employment increased by 30,800 in April. The share of total employment in temporary help services, 2.0 percent, has now ticked above its prerecession share (which was 1.9 percent in 2005, 2006, and 2007). The lowest it got in the Great Recession and its aftermath was 1.3 percent.

Retail trade added 29,000 jobs in April, higher than its average growth of the prior three months, 14,700. Restaurants and bars were another big gainer in April, increasing 37,900, slightly higher than its average growth of the prior three months, 31,000. Health care added 19,000, in line with its average increase of 18,800 over the prior three months.

Construction lost 6,000 jobs in April, a disappointment after the monthly gain of 28,300 in the prior three months. Manufacturing employment was unchanged in April, after adding just 2,000 in March.

Unemployment remains elevated across the board

The table shows the current unemployment rate and the unemployment rate in 2007, along with the ratio of those two values, for various demographic groups. While there is substantial variation in unemployment rates across groups, in every group the unemployment rate is between 1.5 and 2.0 times as high now as in 2007.

TABLE 1

Unemployment rates of various demographic groups, 2007 and today

2007 April 2013 Ratio
All 4.6 7.5 1.6
Male 4.7 7.7 1.6
Female 4.5 7.3 1.6
White 4.1 6.7 1.6
Black 8.3 13.2 1.6
Hispanic 5.6 9 1.6
16–24 10.5 16.1 1.5
25–54 3.7 6.4 1.7
55+ 3.1 5.5 1.8
Workers age 25 and older
Less than high school 7.1 11.6 1.6
High school 4.4 7.4 1.7
Some college 3.6 6.4 1.8
Bachelor’s and advanced degree 2 3.9 2.0
Workers under age 25, not enrolled in further schooling
High school degree 12 19.9* 1.7
Bachelor’s and advanced degree 5.4 8.2* 1.5

* This is the average of the last 12 months. The monthly values for this series are not seasonally adjusted.

Source: Author’s analysis of the Current Population Survey public data series

Conclusion

Despite more than three years of job growth, the labor market still has a deficit of 8.7 million jobs, and the lack of demand for workers means unemployment remains high, labor force participation is low, and wage growth for people with jobs is sluggish. The Class of 2013 will graduate into a labor market that is still very weak. As discussions take place this spring about what to do for these young workers entering a dire labor market, it is important to note that although young workers are a unique group, their currently high unemployment levels do not require a unique solution. The thing that will bring down the unemployment rate of young workers most quickly and effectively is strong job growth overall. Focusing on policies that will generate demand for U.S. goods and services (and therefore demand for workers who provide them)—policies such as fiscal relief to states and substantial additional investment in infrastructure—is the key to giving young people a fighting chance as they enter the labor market during the aftermath of the Great Recession. This would require policymakers to prioritize job creation over deficit reduction.

— Research assistance provided by Nicholas Finio, Natalie Sabadish, and Hilary Wething

Press release

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