Friday, January 09, 2009

U.S. Job Market Continues To Deteriorate

The U.S. job market continued the dramatic decline from recent months in December, with the payroll number (which the markets usually focus on) showing 524,000 fewer jobs, bringing total 2008 job losses to 2.6 million, more than half of which occurred during the fourth quarter. The numbers for previous months were again downwardly revised, and it seems almost certain that this number will also be downwardly revised. The less watched household survey number showed even greater losses, 806,000 and 3.0 million respectively. As a result, the unemployment rate rose during 2008 from 4.9% to 7.2%, despite a decline in the participation rate from 66.0% to 65.7%. As before, the decline was even more dramatic for the private sector, while government employment held steady.

The details looks even worse as the average week worked among those that have a job fell to an all-time low of 33.3 hours per week, down from 33.8 hours per week a year ago. This reflects a dramatic increase in part-time unemployment or underemployment, which is to say workers who have a part-time job, but would like to have a full-time job. Part-time unemployment rose to 5.2%, up from 4.7% in November and 3.0% in December 2007.

As a result of the decline in both employment and the average work week among those employed, hours worked in the private sector fell a full 1.1% in December compared to November, which is a lot for one month. Compared to December 2007, this number is down 4%.

As in the previous report, the one silver lining is that average wages for those that are still working as many hours as before continues to rise, as average hourly earnings rose another 0.3%. Given that the CPI likely fell in December, the real increase will be slightly more than that. The main cause of this gain is likely disproportionate job losses among low paid workers.

Yet this will not be nearly enough to compensate for the dramatic decrease in hours worked, so this report clearly indicates that the U.S. economy in December was as weak as ever during this slump.


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