TOPICS > Economy

U.S. Shed 63,000 Jobs, Spurring More Economic Fears

March 7, 2008 at 6:10 PM EDT
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Recently released economic statistics show the U.S. lost 63,000 jobs in February. An executive at a job placement firm and a former top-level Department of Labor official examine the factors behind these job-market losses and what lies ahead for the American economy.
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JIM LEHRER: Ray Suarez has our jobs story.

RAY SUAREZ: The slumping economy’s losses are now spreading from the world of housing, credit and finance into the job market.

The government reported today that nearly 90,000 jobs have been eliminated in the first two months of this year.

For a closer look, we turn to: Lisa Lynch, a former chief economist at the Department of Labor, she’s now a professor of economic affairs at the Fletcher School at Tufts University; and John Challenger, chief executive officer of the outplacement firm Challenger, Gray & Christmas.

Professor Lynch, what does that jobs number tell you about the state of the economy?

LISA LYNCH, former Department of Labor chief economist: Well, Ray, when we look deeper into what was behind that decrease in employment that we saw for the month of February — and, as you noted, a revision down for January, as well — there’s a lot of bad news in this report.

First of all, we had a decrease of 63,000. But if we took out gains in state and local employment, the private sector in the United States actually contracted 101,000 jobs in the month of February. And that’s the third month in a row that the private sector has actually experienced a net job loss.

On top of that, there are a lot of people out in the labor market who are in part-time employment but actually want to work full-time. So we have 5 million people in the United States right now who would like to work full-time but, because of economic conditions, cannot find full-time employment and are only in part-time employment.

RAY SUAREZ: John Challenger…

LISA LYNCH: If we look…

RAY SUAREZ: … even though the number declined by tens of thousands, as the professor just cited, the unemployment rate actually declined slightly. How does that work?

JOHN CHALLENGER, Challenger, Gray & Christmas: Well, what happened was about 450,000 people left the job market; they stopped looking.

And there are a lot of people out there, if you come out of the mortgage business, and you’re an underwriter or you’ve been in construction, and there just aren’t any jobs out there because those two areas of the economy are just not ticking, you might say to yourself, “I’m going to wait until the weather is better. I’m just not going to be looking.”

And so what happened, with all those people leaving the job market, that it caused the unemployment rate to go down.

RAY SUAREZ: Do people whose unemployment benefits run out also enter that “no longer counted” category as part of the active workforce?

JOHN CHALLENGER: No, they can continue — if they’re looking, if they’re going out and seeing people, they get counted. But we are seeing, again, more and more people who are looking in this job market, who’ve been out of work for a longer period of time. The market’s getting tougher.

Another thing that happened here was that temporary jobs have continued to drop, and dropped this month. That suggests that many employers who brought those people on to handle their surges are looking to those people first.

As their businesses wind down or get worse, they’re taking them off their payrolls. And so we’re seeing also a drop in a very robust category, consistently over the last couple of years, in this report, and that is professional and business services.

Finding work takes longer

Lisa Lynch
Tufts University
It's almost 1 in 5 workers that are out of work, have been out of work for six months or more.

RAY SUAREZ: Mr. Challenger, you mentioned at the outset that people who are discouraged by the conditions in their own line of work sometimes decide to stop looking. Talk a little bit more about the psychology of that.

Is there a sort of individual time clock, where people just realize they're not going to be able to get a job doing what their first choice is and then return to the labor market or accept employment in other sectors? When you look at human behavior in this way, what do people do when faced with that situation?

JOHN CHALLENGER: Well, you have some tough choices, because you say, "I could go back to school. That might be an option, and I'll wait it out." We see younger people often do that.

Or you might say, "I could move to another city." If I'm in Detroit and I know the automotive business is so difficult, do I want to pick up and move my family? You might say, if you're in the mortgage business, you know, "Can I take some of my skills and move them to another industry?"

And we do see about 40 percent of people change industries. They take their skills, but they move them to a stronger area of the economy, like health care, and make that change.

But if you're in a specialized area, like some of these underwriters in the mortgage business or the funders and the closers, or you're a carpenter, you might say, "It just doesn't seem like there's right now, with the economy, at least in my are, flat on its back in construction, home building, and in lending out mortgages, maybe it would be better to wait."

It doesn't mean intellectually they say, "I know I should be looking," but the fact is sometimes you put it off because you have to go out and get rejected.

RAY SUAREZ: Professor Lynch, when you drill down into the numbers, are people taking longer to find work? Can they expect, if they lose a job, to be out of work longer?

LISA LYNCH: So when we look at the numbers, we see that the fraction of people who've been out of work for six months or more over the last couple of months has been fluctuating between 17 percent and 19 percent. So it's almost 1 in 5 workers that are out of work, have been out of work for six months or more.

So it is taking a large fraction of people who are unemployed longer to find work. But part of the reason why it's taking them also longer to find work, as John was talking about, how people are looking for work, has to do with the housing market, because individuals who might want to pick up and leave -- let's say, in the Midwest, where we've seen big decreases in manufacturing employment -- they've put their life savings into their home.

And they're seeing the equity value of their home falling. And there's no buyer out there who's going to buy their home. So they're locked into staying in their community and not pursuing job options in other parts of the country because of the housing crisis.

Job losses hit all sectors

John Challenger
Challenger, Gray & Christmas
If you're out of work, you just can't fall prey to that sense of, "Maybe I'd better take some time off," because the longer you're out of work, the more hiring companies begin to say, "Why hasn't someone else hired you?"

RAY SUAREZ: And is there further -- a geography of the market at this point? Are there parts of the country that are doing relatively well, while others are suffering worse from, let's say, the downturn in housing?

LISA LYNCH: So one of the things that we see in this report -- this is reporting numbers for the nation as a whole, and we'll get some information a little bit later this month about specific states and regions -- but one of the things that we see again in this report is that the decrease in employment is now diffusing across a wide range of sectors.

From manufacturing, that lost 52,000 jobs, in spite of the fact that the dollar is weaker and we should be having more exports of our manufacturing goods, that's down. Construction is down. As John mentioned, the financial services is down in employment. Retail sector is down in employment.

So this reduction in employment is diffusing across many sectors of our economy. It's not just concentrated in the housing sector. And that suggests that the diffusion will be broader, also, regionally.

RAY SUAREZ: So if, John Challenger, someone came into your office Monday morning, what kind of advice would you give them about their coming search?

JOHN CHALLENGER: Well, if you are in your job, you want to be taking measures to make it stronger, make sure that you get more face time back at home if you're traveling a lot, at the office. Make sure your relationships are strong with the people around you, so that if they have to make a layoff decision, they don't choose you. There's people to advocate for you.

If you're out of work, you just can't fall prey to that sense of, "Maybe I'd better take some time off," because the longer you're out of work, the more hiring companies begin to say, "Why hasn't someone else hired you?"

So you do really need to stop and say, "All right, the headlines look bad, but unemployment right now is at 4.8 percent." There are some very strong areas of this economy, still, from a jobs standpoint. Health care is strong; the energy industry is very strong; global growth, so international companies continue to great jobs for this economy.

So you have to go out and say, "I'm going to go find a job. I'm going to get at it now. I can't put it off."

RAY SUAREZ: John Challenger, professor Lynch, thank you both.

LISA LYNCH: Thank you.

JOHN CHALLENGER: Thanks, Ray.

JIM LEHRER: On our Web site, there's an Insider Forum about the economy. You can send your questions to PBS.org.