Count all the crosses and count all the tears, these are the losses and sad souvenirs. This devastation once was a nation. So fall the dice, how high is the price we pay. The song, Story of a Soldier, is the only part of the musical soundtrack to the 1966 spaghetti western film with lyrics. The soundtrack, which was written by Ennio Morricone reached number 4 on the Billboard charts.
The latest jobs report (technically The Employment Situation – December 2013) can only be described as good, bad and ugly.
The Good: The headline numbers from the December jobs report were surprisingly positive. The unemployment rate fell dramatically from 7.0 percent to 6.7 percent, and the nation created 74,000 new jobs. This marks the 39th straight month of positive job gains. In December, the fall in the unemployment rate was broad based. Unemployment fell across educational levels, across age groups, for men, for women and across racial groups. In other words, based on the headline unemployment numbers, December is a breakthrough month, where the positive news on profits, GDP, production and trade are finally showing up in the labor market.
The Bad: Unfortunately, as in the spaghetti western, the good (Clint Eastwood) is shadowed by the bad (Lee Van Cleef), and just like in the movie, the bad in the December report is a killer. While job growth was positive, it was very low – lower than in the past 34 months. In other words, the US economy created less jobs in December than in each month over the past three years. Even worse, the number of people in the labor force fell by over 300,000. This brings the labor force participation rate (or the percent of working age people actually employed or looking for work) to its lowest level in 35 years. Even though it is true that the overall labor force may fall somewhat as the large baby-boom generation retires, the participation rate reflects only the proportion of “working-age persons,” defined as people between the ages of 16-64. So as baby-boomers age, they fall out of the labor force, but this should not impact the participation rate. So while the unemployment rate is falling, it is almost all due to reductions in the number of people working or looking for work, and not due to job growth. In addition to less people working, average hours worked per person fell slightly in December.
The Ugly: In the movie, the ugly (Eli Wallach) was a bandit, and the ugly in the Jobs report is also a thief, stealing the prospects for both a generation and a population. In December, the broadest measure of unemployment (what is called U-6) remained constant at 13.1 percent. In other words, 13.1 percent of the shrinking labor force is either unemployed, working part-time because they cannot find a job, or what is called “marginally attached” to the workforce, meaning that they once worked, and would work again if they could find a job, but are so discouraged that they have stopped looking for work.
The real economic tragedies that are brought up every month in the Jobs Report include unemployment levels among African Americans, which while down in December are still at 11.9 percent. Even more ugly is the fact that for young African Americans, the unemployment rate is a whopping 35.5 percent, compared to 18 percent for young white people.
This high level of youth unemployment for all racial groups is another ugly part of the jobs report. Again, December numbers were down sharply but that was solely due to a fall in the participation rate as the actual number of employed young people fell. Looking at the entire post-war period (including the recent recession and the double dip recession during the early 1980s), youth unemployment has averaged about 11.8 percent. The last time the rate was 11.8 percent or lower was in April of 2008, even accounting for the massive drop in participation rates.
High youth unemployment is partly due to the fact that people with less than a high school education basically cannot find a job. By definition, part of the young labor force is still in high school, and since only about a third of kids go to college, a large number only have a high school level education. The latest data suggest that the number of people over 25 without a high school diploma who have jobs is falling dramatically. The unemployment rate dipped below 10 percent for this cohort for the first time since mid-2008, but only because labor force participations rates have fallen by 6 percent. The actual number of people without a high school diploma that are actually working is down by 1.2 million individuals.
So while there are good things to say about recent movement in the labor market, these need to be taken with a big grain of salt. So fall the dice, because the country is paying a very high price for leaving large parts of the labor force behind.