Unemployment Jumps to 6.1 Percent, Women Hit Hardest

By Dean Baker

"The labor market is as weak or weaker than at the worst points of the last recession."

The unemployment rate jumped to 6.1 percent in August, the highest level since September of 2003. The establishment survey showed the economy losing another 84,000 jobs in August. With downward revisions to data for the prior two months, the economy has lost an average of 81,000 jobs over the last three months.

Virtually all the data in the household survey indicates that the labor market is weakening at a rapid pace. The 6.1 percent unemployment rate is only 0.2 percentage points below the 6.3 percent peak reached in June of 2003. The employment to population ratio (EPOP) ratio fell to 62.1 percent, only slightly above the 62.0 percent low hit in September of 2003.

Unemployment rose among almost all demographic groups, but women were hit hardest, with a rise of 0.7 pp to 5.3 percent. This is equal to the high for the last downturn in September of 2003. Black women saw their unemployment rate jump by 1.6 percentage points to 9.1 percent. The unemployment rate for blacks overall rose by 0.9 pp to 10.6 percent. The unemployment rate for Hispanics jumped by 0.6 pp to 8.0 percent, the highest level since reaching 8.1 percent in July of 2003.

Workers at all educational levels had an increase in their unemployment rates. Workers without high school degrees had the largest rise, with their unemployment rate going up 1.1 pp to 9.6 percent, the highest level since October of 1994.

There continues to be sharp differences in employment experiences by age group, with older workers staying in the work force in much greater numbers. Over the last year, employment among people over age 55 has risen by 1,046,000. For people under age 55, employment has dropped by 1,322,000. The biggest decline has been for people between the ages of 35 and 44, who saw employment drop by 932,000 or 2.7 percent. Employment among men in this age group fell by 554,000 or 3.0 percent.

Other data in the household series also indicate labor market weakness. The number of involuntary part-time workers increased by another 42,000 and now stands almost 1.8 million above the low hit in April of 2006. U-6, the Labor Department's broadest measure of labor market slack, rose to 10.7 percent. This is higher than at any point in the last downturn and the highest level since July of 1994.

The establishment data indicate that the rate of job loss in the private sector might be accelerating, with a loss of 101,000 jobs in August. The private sector has lost an average of 92,000 jobs over the last three months.

While most sectors lost jobs last month, manufacturing was hardest hit with a loss of 61,000 jobs, driven by a loss of 39,000 jobs in the auto sector. Over the last year, the auto sector has lost 129,000 jobs, or 12.9 percent of total employment. Retail trade lost 19,900 jobs, driven primarily by a loss of 14,100 jobs in auto and auto parts stores.

The employment services sector lost 53,400 jobs in August. This brings job loss in this sector since January to 279,000, 7.8 percent of employment in the sector. Since temporary employment is often a harbinger of future employment trends, this is not good news.

The only sectors that continue to show healthy job gains are health care, which added another 26,900 jobs, and state and local governments, which added 18,000 jobs. Job growth in both of these sectors is likely to fade as state and local budget shortfalls force cutbacks.

The wage story looks somewhat brighter for workers, with nominal wage growth accelerating to a 3.8 percent annual rate in the last three months (compared to the prior three), but this is still far below the rate of inflation.

This report shows that the labor market is in a recessionary state. It is almost certain to worsen in the foreseeable future as employment growth in health care and government slow, while other sectors continue to have large layoffs. Also, the benchmark revisions to the establishment data, which will be published with next month's report, are likely to show an even more negative picture.

Dean Baker is the Co-director of the Center for Economic and Policy Research. CEPR's Jobs Byte is published each month upon release of the Bureau of Labor Statistics' employment report. For more information or to subscribe by fax or email contact CEPR at 202-293-5380 ext. 102, or morgavan [at] cepr [dot] net