The five graphs below show with stunning visibility how bad the economy is today. Chart 1 shows changes in nonfarm employment from 1990 through the end of October, 2008. You can see the dramatic drop of 240,000 jobs lost last month in this graph. Also shown are the relative lengths of the last two recessions: the 1991 drop was relatively short, lasting about one year. The 2001-02 recession was much longer and less well defined than previous recessions. There was an increase in jobs shortly after 2002, only to plunge back into the red again in 2003.
This graph also shows the anemic recovery that followed. Note that the job creations shown in the space above the zero line after 2003 were well below those of the earlier recovery. We never made a full recovery from the 01-02 recession.
Chart 1: Change in Nonfarm Employment
All data from Bureau of Labor Statistics: Graphs from NY Times
Chart 2, below, shows the overall unemployment rate over the same period. Again, the recovery during the early period of President Clinton’s Presidency showed a rapid recovery—seen by the falling unemployment rate to a low of around 4% when he left office. Beginning in 2001 the unemployment rate increased 2003. After 2003 a fairly good recovery began and lasted from 2004 until 2007. At that point, things began getting bad again. What was an anemic recovery quickly gave way to a more serious downturn, which we are just beginning to experience.
Chart 2: Unemployment Rate
Chart 3 shows the unemployment rate among different ethnic groups. Blacks have always had a higher unemployment rate than whites, and since the Department of Labor began keeping track of unemployment by ethnic groups, Hispanics have traditionally been lower than Blacks and higher than Whites. Also, once Asians were tracked, their rates of unemployment have more closely mirrored that of Whites. All groups, however, are suffering with the current downturn.
Chart 3: Unemployment by Ethnic Group
Chart 4 shows that the unemployment crisis also affects those who keep working. The number of part-time workers who want full-time work rises dramatically once the unemployment rate begins climbing. This reflects the reality that many full-time workers are effective in getting only part-time work during the down-turn.
Chart 4: Part-Time Workers who want full-time work
This is a hidden cost of unemployment, since these workers don’t show up on the unemployment statistics or unemployment benefits program.
Chart 5: Real Weekly Wages
Chart 5 shows the effects of unemployment in terms of the general wage level of all workers. The real wage is the dollar wage per week adjusted for inflation, showing that even those who continue working in a downturn often end up getting behind the inflation curve. During recession they work for less purchasing power than when the economy was sound.
It doesn’t look good for the coming months. Many respected economists predict that the unemployment rate could reach eight percent before it begins getting better. You can surmise from these charts, that this will be especially hard on the minority populations. They will work less than they want and for real wages below what they need.
This is not a pretty picture, and it points to the need for a significant stimulus program that will directly create jobs. In a nation that needs to rebuild its infrastructure after decades of neglect, there will be plenty of men and women willing to work on such projects. Job creation, in my view, will be much more effective in easing the pain of unemployment than stimulus checks. Those checks that were mailed earlier this year were not spent as freely as Congress had expected. During tough times, when jobs are harder to get and hold, the fear factor enters the equation. Stimulus checks given at that time are often hoarded rather than spent.
The details of a new stimulus package will soon be discussed in Congress and the White House. We should forget about trying to balance the budget, and go with a huge public works program. The nation is in need, and quick and powerful action is necessary to bring us out of this trying period.
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