TOPICS > Economy

Mounting Losses

December 7, 2001 at 12:00 AM EST
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TRANSCRIPT

TERENCE SMITH: Just over a year ago, unemployment was 3.9 percent, the lowest in 30 years; the November rate announced today was 5.7 percent, the highest level in six years. Since March, when the current recession began, 1.2 million jobs have been lost in the US economy. Here to walk us through the numbers is Lisa Lynch, former chief economist with the Labor Department. She’s now at the Fletcher School of Law and Diplomacy at Tufts University. Welcome. Lisa Lynch, how do you read these latest unemployment numbers?

LISA LYNCH: Well, I think we’ve had two months of back-to-back sobering news on the employment front between October and November. The US economy has lost approximately 800,000 jobs. We’ve seen a sharp increase in the unemployment rate. And this is now…we’re in a recession, it has been officially designated starting in March of this year, but we’re now seeing the slowdown in the economy permeating across all sectors within the economy. It’s still particularly concentrated within the manufacturing sector, and yet again in November manufacturing continued to shed a large number of jobs. But we’re also seeing declines in employment in other sectors of the economy, across occupations and across regions of the country.

TERENCE SMITH: And the numbers are higher than you and others expected?

LISA LYNCH: Yes, the consensus forecast today was expecting an up tick in the unemployment rate but to 5.6 percent, not to 5.7. And I think probably more importantly looking at the number of jobs lost, economists were expecting about 190,000 jobs lost and we had 300,000 plus jobs lost this month, plus a significant downward revision in employment for last month. So the numbers are large and staggering and certainly we’ve not done a particularly good job forecasting that would happen.

TERENCE SMITH: What explains them, in your view? Is it the recession we are seeing deepening and fulfilling now, or is it September 11, or some combination?

LISA LYNCH: I think it’s actually a combination of the two. We saw softening of the economy already starting to play in on other indicators of economic activity before September 11. Then we had September 11, and we had a sharp impact on the employment front. Part of the increase in the unemployment rate that we’re seeing now is reflecting both September 11 and activities that were happening slowing down the economy before. Unemployment is a lagging indicator. We see increases of the unemployment rate following decreases in economic activity. So it’s not necessarily a surprise that you see the unemployment rate increasing later on into a recession than what a group of economists would designate as the start of the recession, which is March of this year.

TERENCE SMITH: Would it then follow that it’s likely to get worse still before it gets better?

LISA LYNCH: I think unfortunately that is the situation. We’ve not peaked in terms of the unemployment rate, unfortunately at 5.7 percent many economists are forecasting unemployment rate reaching 6.5 percent by the spring. And we may very easily reach 6 percent in the unemployment rate by the beginning of the new year. When we look at the unemployment numbers, we see that not only are a lot of people losing jobs, about but people who lost jobs are staying unemployed for a longer period of time. So people who have been out of work for six months or more, that percentage of unemployment has more than doubled since this summer, so there’s a lot of indication that not only are people losing jobs, but once they lose jobs, it’s taking longer for them to find new employment.

TERENCE SMITH: Can you describe for us, based on the trends of the last few months, who these people are, what jobs, which age groups, even what part of the country?

LISA LYNCH: Well, we’re seeing…this is a broad-based increase in unemployment, across all occupational categories we’re seeing the unemployment rate increasing. But clearly those with more education have lower unemployment rates than those with say a high school diploma or less than a high school degree. But what is interesting is that you’re seeing managerial unemployment increasing, technician unemployment increasing, skilled production workers increasing. But the group with the highest unemployment rate are unskilled production workers, those with less education. Geographically, we’ve seen across most states, about 42 states and the District of Columbia over the year have seen their unemployment rates rise, but the areas with the highest unemployment is concentrated in the West and lower unemployment rates in the Midwest and the Northeast.

TERENCE SMITH: Any bright spots you can point to?

LISA LYNCH: Well, health services continues to steadily add new jobs in health services. There has been some positive employment growth in financial services, and that’s very much concentrated in refinancing, which many Americans have been taking advantage of the lower interest rates, consolidating debt in at a lower interest rate, particularly important now with the slowing of the economy. So that sector has been growing slightly. Guard services has been growing as well. But those areas of growth cannot compensate for the large job losses that we’re seeing elsewhere in the economy.

TERENCE SMITH: And we have the Fed meeting again next week.

LISA LYNCH: Correct. Next Tuesday they will be meeting.

TERENCE SMITH: What’s your guess?

LISA LYNCH: Well, my guess is that with today’s report, any doubt about whether or not the Fed was going to actually move next week was taken away. I think the question now is will, how much will they move in terms of lowering interest rates? Will they go 25 basis points or 50 basis points? And at the moment, we still do not have an economic stimulus package coming out of Washington. And you can be sure the Fed will be looking to see what’s happening on Capitol Hill. But they are the only game in town at the moment in terms of giving some additional stimuli into the economy.

TERENCE SMITH: Lisa Lynch, thank you very much.

LISA LYNCH: Thank you, Terry.