Friday, November 7, 2008

A Dreadful Jobs Report Recalls the 1980s

Today’s jobs report was dreadful — much worse than economists had anticipated — and you will be hearing a lot of comparisons that try to put it in context. This one may be the most telling:

The share of adults who are working — 61.8 percent — is at its lowest level in 15 years. And even that, arguably, understates the depth of the problem. Fifteen years ago, women were less likely to be in the labor force than they today. The share of adult men with jobs, which has been gradually falling for much of the last few decades, is now at its lowest level since the Labor Department began keeping records in 1948.

Just about every economist thinks that the labor market will continue to get worse, which means it’s on a path to be in its worst shape since the painful recession of the early 1980s.

The worst news in the report was tucked away in the details. Every month, the Labor Department releases an initial estimate of the employment change from the previous month and then updates that estimates as new data comes in over the following two months. This morning, it said that employers had cut 284,000 jobs in September — almost twice as many as initially thought. They also cut another 240,000 jobs in October. The cuts are of roughly the same scale as those in the months immediately after the Sept. 11 attacks.

The one bright spot is that inflation is abating, mostly because of plunging oil prices. So while the real weekly pay fell 2 percent between September 2007 and September 2008, it fell only 1.4 percent between October 2007 and October 2008.

But a drop of 1.4 percent is still pretty terrible. It’s a bigger drop than at almost any point during the 2001 recession or in the wake of it. Back then, households were also able to dip into their rising home values to supplement their incomes. Not anymore. No wonder the latest retail numbers have been so dismal.


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