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The shocking disappearance of 0.38% of American jobs
A whopping 0.38% of American nonfarm jobs disappeared in September and October, the Labor Department announced today.
What? That doesn't sound whopping? It's 524,000 jobs, which amounts to a lot of people's livelihoods lost and financial security dashed. But it's still just a tiny share of those employed in this country, estimated at 136,899,000 in October. And by the standards of past recessions, it's not that big a drop--there were more severe slides in employment in 2001 and 1991, and significantly more severe ones in 1981 and 1982.
This could just be the beginning of a much worse employment decline, of course. Since the beginning of this year, payroll employment is down a total of 0.85%. Between July 1981 and December 1982, employment shrank by 3.1%. But even that 3.1% figure is a reminder that economic downturns (and economic upturns) play out mainly on the margins. The vast majority of workers remain employed--and will remain employed even if the recession deepens. Barring an unraveling of the financial system, they will eventually get back to spending at a healthier pace than in the scary month of October.
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Justin, I have a newbie question, when they report the jobs cut are they taking into account of actual jobs lost or just the announced layoffs by companies? Example, Ford just announced 2600 job cuts. Would that be included into the next jobs report for Nov. even though nobody has officially lost their job yet and it will probably take some time before Ford decides which employees to layoff?
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Justin, you're right, and to be honest, from my vantage point I don't even see much of a recession. However, let me offer a few mitigating circumstances. First, even a small percentage of job loss is painful, and has a ripple effect across the economy over time.
Second, it's not just job loss this time. The combined loss of asset value (mostly homes, but also stocks) obliquely adds to the feeling of being poor and not in control.
Third, the credit freeze is preventing those with job loss from turning to credit cards (and home equity loans if applicable) from buffering themselves against the prospect of running out of money. Of course, they may have been highly leveraged to begin with, a practice that became far more socially acceptable in this decade than in the past.
It adds up to possibly being worse than simply the loss of a small percentage of jobs. While it's difficult to find sympathy for a group that let themselves become overextended in the aggregrate, it is much easier to feel for them on an individual basis.
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@yogi: No, just announcing a layoff has no impact on the monthly jobs report. Only actual jobs losses show up (or at least estimated actual job losses).
The monthly employment report is based on two surveys. The payroll numbers, which I cite above, come from the establishment survey of about 150,000 businesses and government agencies. That covers about 1/3 of the nonfarm workforce, and BLS extrapolates its numbers from that.
The unemployment rate, meanwhile, is calculated from a survey of about 60,000 households. So it's a much smaller sample size. But it can catch jobs (self-employed, small businesses, new companies, etc.) that the establishment survey misses.
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This is only a relatively mild shock. It is just the very beginning of something far more drastic and dreadful.
The first casualty of recession always falls on employment. As the unemployment rate in the US now shoots up to almost 6.5%, one can try to imagine the awful consequences, especially in the coming year. Yes, there had been bad times in the past, but this time the penalty to be paid by the generally innocent public is going to be definitely beyond common comprehension.
Unemployment worsens recession which in turn causes more unemployment. And the vicious circle continues to lower the standard of living of most people -- nly then can things get better gradually.
Be prepared for a worse scenario, VERY MUCH WORSE.
(Tan Boon Tee)
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