Saturday, January 16, 2010

2009: A Bad Year for Jobs, but Some Light at the End of the Tunnel

2009 Was a bad year for the U.S. job market. Unemployment hit a peak rate of 10.1 percent in October, and barely edged down to 10.0 percent in November and December. There was a glimmer of hope when 4,000 payroll jobs were added in November, but payroll employment declined again in December, by 85,000 jobs.

Some observers were heartened by the fact that unemployment did not rise to its previous post-World War II peak of 10.8 percent, recorded in December 1982. A more significant ray of light at the end of the tunnel was the fact that the rate of job loss slowed dramatically toward the end of the year, compared with monthly losses in the hundreds of thousands in earlier quaters.

Looking beneath the headline unemployment and payroll numbers, it was harder to find good news. The structure of unemployment by duration worsened significantly. By year's end, nearly 40 percent of the unemployed had been out of work six months or more. Long spells of unemployment are considered especially damaging since they may lead to a loss of job skills.

Broader measures of labor market hardship also worsened. Some observers consider the measure "U-6" to be the best measure of labor market hardship. In addition to workers included in the standard measure (which includes only those who are not working, but actively looking for work), U-6 adds others who suffer from bad labor market conditions. These include discouraged workers and other marginally attached workers, who say they would look for work if they thought any work was available, and also people with part time jobs who say they would prefer to work full time. U-6 rose from 13.5 percent  of the labor force in December 2008 to 17.3 percent in December 2009. Furthermore, U-6 edged slightly higher in November and December, even after the standard measure of unemployment flattened out.

To download a free set of PowerPoint slides summarizing the 2009 employment situation, follow this link. Feel free to cut-and-paste the slides into your lectures, or assign them to your students as independent reading. If you like the slides, please post a comment or send me an e-mail.

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