Real unemployment rate tops 17.0%, highlights failure of stimulus bill

Friday's unemployment report produced growing economic concerns over the likelihood of an economic recovery that fails to produce job growth.   Despite billions of dollars in stimulus spending that continues to flow out  of Washington, the Department of Labor report pointed to job loss numbers that have failed to improve amid the spending. 

The Department of Labor reported a rise in the adjusted non-farm unemployment rate to a new high of 9.8% after the economy shed another 263,000.  However, beyond the adjusted payroll number lies a host of employment numbers including the disturbing reality that 1 in every 6 Americans is now unable to find full-time employment. 

As pointed out in an article last month, the adjusted payroll numbers do not include 2 groups of unemployed workers that the DOL refers to as temporary part-time workers and marginally attached workers. The DOL reported that 9.2 million Americans are currently working part-time due to economic conditions, an increase of 100,000 workers during September.  This group is comprised of workers who have had their hours cut from full-time status or who have been able to find full-time employment.  In addition the DOL reported that the number of marginally attached workers stands at 2.2 million.  Such marginally attached workers include individuals who are unemployed but have not sought work over the 4 weeks prior to the survey and includes some 706,000 "discouraged' workers that have simply given up.  The addition of such excluded groups caused the real unemployment rate to increase from 16.8% to 17.0%.

Inside the Numbers

The DOL report confirms an ongoing pattern that has developed in which the real unemployment rate continues to rise at a faster pace than the adjusted unemployment rate.  Such a pattern indicates that not only do more Americans continue to lose jobs, but also that the jobless are remaining unemployed for a longer period of time.  The lengthening period of unemployment is reflected by DOL statistics indicating that 1/3rd of U.S. jobless have remained unemployed for longer than 6 months.  Such a high number of chronically unemployed represents the first time since the 1970's that this condition has existed.  

The DOL also adjusted their July and August payroll figures due to late responses and a rush to get the report published.  In July the economy shed 48,000 more jobs than initially reported.  August figures, on the other hand, were reduced by 15,000 jobs.    

The manufacturing and construction sectors continued to shed more jobs in September demonstrating a eerily consistent pattern of job loss throughout the summer.  The continued weakness within manufacturing and construction employment was largely unexpected considering the increase in stimulus funding within the industries. 

The construction industry shed more than 64,000 jobs in September, falling in-line with an average monthly job loss of 66,000 jobs/month since May.  The lack of growth in job creation within the construction industry highlights the failure of stimulus funding aimed directly at creating construction-related jobs.  In addition, the manufacturing sector reported 51,000 job cuts in September regardless of the recall of thousands of workers in the automotive industry.  The uptick in automotive manufacturing jobs was the direct result of the Cash for Clunkers program.  However, the subsequent return of industry sales to pre-August levels indicates that employee recalls are likely to be temporary.  The September numbers were in-line with an average monthly loss of 53,000 jobs since May.

Following ongoing trends, the health care industry added an additional 19,000 jobs last month.  Since the onset of the recession the industry has added 559,000 jobs.  However, the September payroll numbers represent a decrease from the 28,000 jobs created in August.  Additionally, 15,000 of the newly created jobs were within the ambulatory care sector reflecting a dramatic slowing of job creation within the hospital sector.

The most surprising jump in job losses stemmed from the 53,000 government employees that lost their jobs in September.  This increase in government unemployment reflects the failure of stimulus funding to shore up the budgets of state and local governments.  

As pointed out at the end August, the jobless rate is not increasing as rapidly as it was during the first half of the year.  However, employers cut deep and hard during the first quarter of the year and economists had expected employment figures to improve throughout the Fall.  The Economic Recovery Act promised a increased infrastructure spending and subsequent job creation.  Yet, the lack of targeted stimulus has produced typical unemployment patterns.  Historically, the periods July to August and November to December have provided the strongest levels of employment in the US.   July and August numbers are traditionally strong due the height of US construction levels and increased manufacturing in preparation of an upcoming holiday season.  A consistent job loss within these industries during the past 4 months raises the likelihood that sustained job creation within these industries will not occur until next summer, at the earliest.  As a result, we are likely to see the adjusted unemployment rate remain stable through the end of the year.    Economists also warn that if consumer spending does not recover prior the holiday season, then we are once again likely to see a drastic increase in January and February unemployment data and an adjusted unemployment rate approaching 11.0% by Spring.  Subsequently, the real unemployment rate is likely to approach 18%-19% during the same period.

The unprecedented size of the stimulus package has provided a life line to the economy as the rate of government spending has eclipsed all previous records.  However, that life line is not enough to save jobs as the stimulus has failed to provide relief to consumers, increase consumer spending or provided targeted relief to the private sector.  Roughly 70% of our economy is driven by consumer spending and with a stimulus plan that failed to provide relief to consumers, a slow recovery in consumer spending will mean an inherent lack of job creation.  Economists further warn that a continuous expansion of government, while failing to provide expansion of the private sector,  has created an environment in which a double-dip recession is increasingly likely.  Additionally, nearly every economist now agrees that the failure of stimulative policies by the current administration  will lead to a period of slow economic growth and unacceptably high unemployment over the next decade.  As of the end of September 1 in every 6 Americans were unable to find full-time employment.