- The Washington Times - Sunday, August 3, 2003

The unemployment rate fell from 6.4 percent in June to 6.2 percent in July — the first time the rate has declined since January. Nevertheless, the underlying data for the labor market was still decidedly negative for July. Notwithstanding the headline decline in the unemployment rate, the U.S. labor market remains very weak, and continued to deteriorate last month.

According to the Labor Department’s household survey, from which the 0.2 percentage-point decline in the unemployment rate for July was generated, employment actually fell by 260,000 for the month. More than 550,000 people left the civilian labor force last month, many of them because they believed there were no jobs to be found. Statistically speaking, potential workers outside the labor force are not considered to be unemployed because they are not actively seeking work.

The Labor Department’s second monthly survey, which compiles non-farm payroll data from business establishments, revealed that nonfarm employment declined by 44,000 in July. Moreover, that decline comes from a June figure that was revised downward by another 48,000 jobs. Non-farm payrolls declined for the sixth month in a row, having shed 486,000 jobs since January.

Since non-farm payrolls peaked at 132.6 million in February 2001 — just before the recession began in March — the economy has lost 2.7 million jobs. Private-sector employment rolls have fallen by 3.25 million jobs since February 2001. Since the recession ended in November 2001, more than 1 million non-farm jobs and nearly 1.2 million private-sector jobs have disappeared, according to the Labor Department’s business-establishment survey.

In July, employment in the manufacturing industry declined for the 36th month in a row, with another 71,000 jobs shed during the month. Manufacturing employment has collapsed during this three-year period by 2.7 million jobs, having plunged by more than 15 percent, from 17.3 million jobs in July 2000 to 14.6 million jobs last month.

Jobless workers who have been unemployed for 15 weeks or longer increased to 3.6 million in July, the highest level since December 1992 and nearly three times higher than the cyclical low recorded in June 2000. Workers who have been unemployed for 27 weeks or longer averaged 2 million during June and July, the first time that level has been reached since November and December 1992. The proportion of unemployed workers who have been without a job for 15 weeks or longer was nearly 40 percent in July, a level that has not been reached in 20 years.

For June and July, job seekers were unemployed an average of 20 weeks. Not since the first two months of 1984 has a two-month average been that high.

The papers were filled with headlines last Friday trumpeting the apparent acceleration of economic growth during the second quarter, when the annual growth rate increased by 1 percentage point to 2.4 percent. However, based on the Labor Department’s revised data for June, average monthly employment during the second quarter was nearly 250,000 less than average monthly employment during the first quarter. Meanwhile, the quarterly unemployment rate increased from 5.8 percent in the first quarter to 6.2 percent during the second.

All of these observations confirm that growth will have to accelerate much more rapidly in order to achieve a significant increase in employment and a sustainable reduction in the unemployment rate.



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