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The unemployed

Prodded by union leaders, state governments started designating a Labor Day holiday on the first Monday in September more than 120 years ago. The day has always been tinged with melancholy — it marks the unofficial end of summer. This year, however, the holiday is particularly bittersweet.

The Labor Department reported Friday that private employment increased by only 67,000 jobs in August, or 40,000 fewer than in July. That leaves 14.9 million people unemployed, in addition to the 8.9 million who are employed part time because they can’t find full-time jobs. It was the eighth consecutive month of increased private hiring but the second with no improvement in the unemployment rate, which inched up to 9.6%.

Granted, the situation was worse in the last three months of 2009, when 10% of the country was unemployed. But painfully slow economic growth and even slower hiring has scarcely improved matters since then. And now the country’s workforce finds itself in an unusually uncomfortable position: For the first time since the Depression, unemployment is likely to be above 9.5% for two consecutive Labor Days.

The sputtering recovery has sharpened Washington’s focus on jobs and unemployment, but Democrats and Republicans remain sharply divided over what to do. Having counted on last year’s $787-billion stimulus package to revive the economy, Democrats were slow to respond when joblessness continued to increase through much of 2009. And now their ranks are split between liberals eager for more stimulus and moderates anxious about the deficit. Republicans, meanwhile, blame the economy’s problems on the stimulus package, healthcare reform and just about every other Democratic initiative. They argue that the best tonic would be to extend the Bush tax cuts permanently, a proposal that has no chance on Capitol Hill but may play well on the campaign trail.

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To craft the right response to the unemployment problem, it helps to understand who the unemployed are and why they don’t have jobs. Here are some insights provided by the data that the Bureau of Labor Statistics assembles:

The downturn has been an equal-opportunity unemployer. Joblessness has increased dramatically for almost every demographic group and almost every industry. Unemployment in April, May and June was more or less twice as high as it was before the recession for whites, blacks, Latinos and Asians. Joblessness rates increased significantly for the old, the middle-aged and the young, women and men, the college-educated and high school dropouts.

Jobs vanished in construction, manufacturing, sales, transportation, finance and information services. And even in the few industries that gained jobs, such as education, health and hospitality, hiring didn’t increase fast enough to keep pace with the growing supply of workers.

Although the misery is widespread, some groups have been hit harder than others. A new analysis by the National Employment Law Project found that men make up a greater share of the unemployed than they did before the recession — 58% — as do workers 25 and older — 74%. The unemployment rate for workers 55 and older has climbed from 3% to 7%.

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Workers with no education past high school still make up more than half of the unemployed. But the percentage with more education grew slightly, from 46% to 48%. Similar, subtle shifts have occurred in the work experience of the unemployed, with construction and manufacturing workers making up a slightly larger percentage of the total, and hospitality workers, salespeople, teachers and healthcare workers making up less.

The worst off before the recession are the worst off now. More than 45% of black teenage workers were without jobs in August, the highest unemployment rate by far of any demographic group. The seasonally adjusted unemployment rate for all black workers was about 16%, compared with 12% for Latinos and 8.7% for whites.

Workers without a high school diploma are three times as likely to be unemployed as those with college degrees. And single women who support families are twice as likely to be unemployed as married men or women.

It takes longer for the average unemployed person to find a job than it did when unemployment peaked in October 2009. As of August, 42% of the jobless have been idle for more than six months. And the average length of time spent unemployed was about eight months — twice as long as when the recession began. Both of those figures are slightly better than they were in May and June, when they hit the highest levels ever recorded by the Bureau of Labor Statistics.

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Long periods on the dole are not just discouraging to workers; they can stigmatize them in the eyes of potential employers. Some economists contend that extending unemployment benefits to 99 weeks, as Congress has done, exacerbates the problem by discouraging laid-off workers from accepting lower-paying jobs. That argument, however, ignores how few jobs are available — according to the Bureau of Labor Statistics, there are five unemployed workers for every opening (a figure that doesn’t include the underemployed and those who want to work but have stopped looking).

Still, the current approach to unemployment could be improved by increasing the emphasis on retraining and providing subsidies for working rather than not working. One idea, advanced by economists Dean Baker and Kevin Hassett, is to use state unemployment benefits or federal tax credits to aid workers whose hours were sharply reduced, encouraging employers to cut costs through furloughs instead of layoffs. Another, offered by economist Howard Rosen, is to use unemployment benefits as a temporary aid program for the re-employed, making up part of the difference in wages when a laid-off person takes on similar work for less pay. As with the Baker and Hassett proposal, Rosen’s aim is to make it less expensive for employers to hire or retain workers.

More jobs are being lost than created. After the 2001 recession began, it took almost three years for job gains to pull firmly ahead of losses. We’re in a similar situation now, but with a much steeper drop in employment creating a far deeper hole to climb out of. Non-farm job losses outnumbered gains in all but one month from January 2008 to January 2010. Since February, job gains have pulled narrowly ahead of job losses in the private sector, but government layoffs tipped the balance back in June, July and August.

Employers have the resources to hire — corporate profits have bounced back strongly from the recession and companies have stockpiled huge amounts of cash — but not the will, at least not in the U.S. Conservatives blame the Obama administration for creating uncertainty about taxes and regulatory burdens, but the greater uncertainty for businesses is whether consumers are ready to begin spending again.

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Job growth is in lower-wage occupations. A number of forces influence which jobs are becoming available. The glut of unsold homes and empty offices is drying up jobs in construction. The slowdown in construction and the housing market has exacerbated problems in the manufacturing sector, whose jobs have been migrating out of the U.S. for three decades. And technological changes have increased productivity and efficiency in many industries, reducing the need for some types of employees.

The National Employment Law Project found that three-quarters of the jobs created this year were in lower-paying fields, even though such jobs accounted for little more than a third of the jobs lost in the recession. Most industries reported job gains from December 2009 to July 2010. But in each of the four occupations with the greatest gains — retail sales, cashiers, food preparation and food service — the median income was less than $10 an hour.

This year’s results aren’t necessarily a harbinger of things to come. Lower-paying and temporary jobs typically form the leading edge of a recovery. Nevertheless, policymakers should be mindful of the need not just for faster job growth but also for more growth in higher-paying fields. The latter depends not just on the revival of the construction and manufacturing industries, but more broadly on America’s ability to compete in the global economy. That’s a challenge we will be confronting for many more Labor Days.


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