A Unemployment Report With out Silver Linings

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A Unemployment Report Without Silver Linings

The bad news in November job numbers reported in November doesn’t relate to job creation, although that was pretty bad.

Employers only added 245,000 jobs in the last month, and even if you factor in the one-off impact of eliminating temporary census jobs, it would take 29 more months to return to employment levels in February at that rate of job creation. But at least there are good reasons to expect those numbers to improve once coronavirus vaccines become widespread.

Most worrying is what seems to be happening among the people who have lost their jobs as a result of the pandemic. The Employment Report suggests that once temporary unemployment is growing ever more permanent – in ways that, if left unturned, could damage millions of families and the economic potential of the United States in the long term.

Although the unemployment rate fell from 6.9 percent to 6.7 percent last month, it had the worst reasons: Many Americans gave up looking for work at all. The number of inactive adults – neither employed nor actively looking for work – rose by 560,000, as the participation rate fell by 0.2 percentage points.

The proportion of working prime-age Americans – between 25 and 54 – was unchanged at 76 percent in November, well below its 80.5 percent in February. The number of people who are inactive but say they want a job is 2.2 million higher than in February.

A growing proportion of the unemployed have long been unemployed. The number of Americans unemployed for more than 27 weeks rose 385,000 in November. Since just September, the number of these long-term unemployed has risen by a devastating 1.5 million people – an increase of 64 percent.

When you put these numbers together, the pattern is clear: many people who lost their jobs in the spring have been continuously unemployed since then, and some of them have given up looking.

A key lesson from the sluggish recovery after the 2008-09 recession is that these prolonged periods of unemployment (active job search) or inactivity (non-working and non-working) have long-term effects.

Even as the economy recovered, people had experienced various forms of damage. Some people’s skills were out of date. But in general, many people have simply lost their sense of attachment to the workforce. It is much more difficult to find a job if you’ve been unemployed for years than if you’ve been laid off on short notice.

And that’s before you get to the more social dimensions of the problem. The unemployed can become vulnerable to addiction problems and other mental health problems. The 2010s non-employment crisis and the 2010s opioid crisis were not entirely separate.

In this episode, the proportion of working Americans in their prime didn’t return to their January 2008 levels until August 2019! When economists talk about what a slow, disappointing expansion that was, that’s a big part of what they’re referring to.

There is a good chance of avoiding that fate in the recovery from the pandemic recession. A rapid regression in employment following widespread vaccination is possible in 2021 and could quickly pull many of the long-term unemployed and non-employed back into the world of work after only about a year of moving away from the rhythm of work.

This is usually the point when analyzing a bad jobs report that points to the silver lining – those little reasons for optimism that hide when you know where to look.

Hard to find this month.

The data in the new numbers are based on the employment level in the week of November 8-14. Various real-time data sources suggest a slowdown in economic activity since then, as coronavirus infections have risen and the weather has grown colder, limiting outdoor and retail opportunities. Employment numbers in December could well be worse.

For a touch of optimism, one of the major job loss categories that dragged the November numbers down is likely to reverse. According to official figures, retailers have shed around 35,000 jobs that are adjusted to the typical seasonal patterns. If you ignore these seasonal adjustments, the sector has created 302,000 jobs – the businesses have done vacation rentals, just fewer than previously predicted.

The good news is that this pattern should reverse in January, which will result in an obvious increase in employment if seasonal adjustments are made.

In a miserable November for American workers, this is seen as a cause for optimism: the people who are not hired as temporary aid to retailers during this holiday season will not lose their jobs in January.

However, the real hope for 2021 is that enough unemployed and inactive Americans can get back to work fast enough to prevent the long-lasting effects of the last scarring area from recurring.