Unemployment rose to 9.5% in June, a 26-year high, according to the U.S. Bureau of Labor Statistics. A total of 14.7 million Americans are now officially out of work, and payroll employment has fallen by 6.5 million since the downturn began in December 2007, 19 months ago. The BLS also reported this morning that yet another 467,000 non-farm payroll jobs were lost in June. That was more than 100,000 above what a consensus of economists had estimated. Job losses in May were revised to 322,000 from an earlier estimate of 345,000.
The official count – known as U3 and dutifully reported by most of the media – fails to show the true extent of the wreckage. Left out of most reporting is U6, the BLS calculation that includes involuntarily underemployed people. That is, those who want a full-time job, but can only find part-time work. Also missing from U3 are discouraged jobless people who haven’t looked for work during the past four weeks. The U6 figure rose in June to 16.5%.
The average workweek fell another 0.1 hour to 33 hours, the lowest since 1964 when the BLS began keeping statistics for that factor.
A set of interconnected gauges of economic misery released today was the number of new claims filed for unemployment benefits, the four-week average of new claims, and the number of continuing claims. There were 614,000 new claims, the four-week average of claims – which levels ups and downs – dropped to 615,250, and continuing claims fell 53,000 to 6.7 million. The continuing claims number, however, may be affected by the fact that a growing number of out-of-work Americans have exhausted their benefits and no longer show up in these statistics. A little less than 40% of workers are covered by unemployment insurance.
In late May, 74% of economists surveyed by the National Association of Business Economists said the economy would begin expanding this quarter although they expected unemployment to continue rising into 2010 before beginning its recovery. One disturbing trend can be found in how long it took in the four previous recessions before the number of workers with job equaled the number employed at the beginning of those recessions. In 1974, the job recovery took 19 months; in 1981, 28 months; in 1991, 32 months; in 2001, 47 months.
Jack Healy of The New York Times reports that "there are going to be massive, massive numbers of people who are out of work for long periods of time," said Andrew Stettner, deputy director for the National Employment Law Project. "It’s one of the most important aspects of where the economy is right now."
"Although the number of people filing for unemployment insurance has leveled off recently, more workers are falling back on safety nets intended for the most troubled workers. More than 2.7 million people received emergency or extended unemployment benefits in the first week of June — the most recent period for which data was available — compared with 2 million at the beginning of the year."
For some observers, long-term prospects don’t look so good in other ways either. For instance, on Wednesday, at the Think Tank at The Big Picture, Barry L. Ritholtz hosted Chief Economist and Strategist David Rosenberg of Canada’s Gluskin Sheff Here’s some of what he had to say:
Most pundits who crow about green shoots and about an inventory restocking in the third quarter giving way towards some sustainable economic expansion live in the old paradigm. They don’t realize, for whatever reason, that the deflationary aftershocks that follow a post-bubble credit collapse typically last for 5 to 10 years. Businesses understand better than the typical Wall Street or Bay Street economist and strategist that everything from order books, to output, to staffing have to now be restructured to adequately reflect a permanently lower level of leverage in the economy.
Indeed, by our estimates, there is up to another $5 trillion of household debt that has to be eliminated in coming years and that process is going to require that consumers go on a semi-permanent spending diet. Companies see this, which is why they are not just downsizing their payroll, but have also cut the workweek to a record low of 33.1 hours. [33 hours as of today’s BLS announcement.] Fewer people are working and those that are still working have seen their hours dramatically cut this cycle.
Companies are finding other ways to save on the aggregate labour cost bill as well, which may be a factor reinforcing the uptrend in the personal savings rate... . For example, a rapidly growing number of employers are now suspending contributions to worker 401(k) plans. According to a joint survey by CFO Research Services and Charles Schwab, nearly 25% of U.S. companies have either suspended their plans or are planning to do so (this is up from 2% at the turn of the year). Again, how we end up squeezing inflation out of the system when the labour market is clearly deflating wages and benefits for the 70% of the economy called the consumer is going to be interesting to watch. ...
It is amazing how many pundits and media types believe we are in a new bull phase and yet the equity market has completely sputtered now for nearly three months above the 900 level on the S&P 500 and 8,400 on the Dow — not to mention the fact that instead of seriously breaking out above the 200-day moving average, the broad market has been struggling at this resistance level for the last few weeks, which is a sign that buying fatigue has likely set in (together with meager trading volumes).
Digging ourselves out of the hole that 30 years of transferring wealth upward through egregious tax policies, off-shoring jobs, continuing out-of-whack defense spending, and failing to invest adequately in infrastructure and innovation is going to take better tools than we now have available to us. Will the White House and Congress provide them?
By Meteor Blades of Daily Kos.