On Friday, July 8th, the Bureau of Labor Statistics released their labor report for June and it was discouraging. Not only did the unemployment rate increase from 9.1% to 9.2%, the rate of job growth was almost nonexistent at 18,000. Private sector employment slowed to a crawl, while government jobs continued their downward trend.
This was particularly surprising because initial reports only a day before showed signs of improvement. Payroll processing company ADP claimed that their private sector employment grew to 157,000, while the Labor Department reported that unemployment claims dropped by 14,000 to 418,000.
People are becoming more pessimistic about the labor market. Typically, we expect to see the labor force grow each month, but it remains sluggish. The labor force participation rate continues to decline to 64.1%, which is down from 64.7% the previous year. Further weakness is shown in the employment-population ratio which dropped 0.2% last month to 58.2%. Lastly, the seasonally-adjusted alternative measure of unemployment that also includes marginally attached workers shows an increase from 15.8% to 16.2%.
Another disturbing trend is the number of long-term unemployed. When individuals are unable to find work over a long period of time, this impacts their future earnings potential as gaps in unemployment become more difficult to explain away and eroding of skills that occur due to idleness. Here is the breakdown of current unemployment by stint:
- Less than 5 weeks: 21.7%
- 5 to 14 weeks: 30%
- 15 to 26 weeks: 13%
- 27 weeks and over: 44.4%
The pain from unemployment varies across demographic groups.
Minorities suffer at a far greater rate than whites:
- White: 8.1%
- Black or African American: 16.2%
- Asian: 6.8%
- Hispanic: 11.6%
Completion of school for adults 25 years or older also makes a difference as shown below:
- Less than high school diploma: 14.3%
- High school graduate, no college: 10%
- Some college or associate degree: 8.4%
- Bachelor’s degree and higher: 4.4%
As we head deeper into the summer season, this was not the sunny outlook that we were hoping for.