JIM LEHRER: Unemployment surged higher in August to 9.7 percent, the worst in 26 years. But job losses slowed.
Ray Suarez has our lead story report.
RAY SUAREZ: Unemployment lines then and now. The early 1980s was the last time the jobless rate was this high, until last month. The increase from July was three-tenths-of-a-point. The Labor Department said more people who had given up looking for jobs returned to the hunt, and now count as unemployed.
Overall, there are 14.9 million Americans out of work. The economy has lost a net total of nearly seven million jobs since the recession began in late 2007. Some of those losses came in August, as employers shed 216,000 jobs. But that was the smallest total loss since August of last year.
In Washington, Vice President Biden said again, that’s still too many.
U.S. VICE PRESIDENT JOSEPH BIDEN: Two hundred and sixteen thousand people lost their jobs last month, much too high, but roughly two-thirds of the job loss we saw on a monthly basis when we took office, and the lowest that it’s been in a year.
Now, I don’t want — I want to be clear about something. Less bad is not good. That’s not how President Obama and I measure success.
RAY SUAREZ: There’s another concern: Unemployment benefits for 1.3 million Americans will run out by the end of the year, unless Congress or the states authorize extensions.
And across the country, state governments are hurting as well. Many are imposing furloughs or laying off workers altogether to cover deep budget deficits.
Just yesterday, Rhode Island Governor Don Carcieri announced he will lay off 1,000 state employees, after a judge blocked furlough plans.
GOV. DONALD CARCIERI, R-R.I.: If everybody just agreed to take a very small pay reduction this year, we wouldn’t have to do that. But I — all I know is, every day that goes by, the situation is getting worse; it’s not getting better.
RAY SUAREZ: Sharon Moreno is one of the workers who could lose her job.
SHARON MORENO: This is not my funny. It really isn’t. This is my job, and I need it.
RAY SUAREZ: There have been some encouraging signs. Chrysler and General Motors have begun calling back limited numbers of workers.
Wall Street took the report in its stride. The Dow Jones industrial average gained 96 points, to close at 9,441. The Nasdaq rose 35 points, to close at 2,018. For the week, the Dow lost 1 percent. The Nasdaq fell half-a-percent.
For a closer look at this jobs report and the larger unemployment picture, we’re joined by Lisa Lynch, dean of the Heller School for Social Policy and Management at Brandeis University and former chief economist at the Labor Department.
Dean Lynch, as you sift through the latest figures, what portrait does that paint overall of the job market?
More Americans looking for work
LISA LYNCH, dean, Heller School for Social Policy and Management, Brandeis University: Well, Ray, as we enter the Labor Day weekend, certainly, this is not the employment report anybody wanted to see as we celebrate labor in this country.
Yes, the -- the job loss number was smaller than anticipated, minus 216,000. That's about a third of the monthly job loss rate that we saw earlier in the year. But that jump in the unemployment rate up to 9.7 percent reflects both, as you said in your setup piece, reentrants coming back looking for jobs and new entrants, college graduates going out into the labor market and not finding employment.
For those people who have lost their job in this report, we see that over a third of all people out of work have been out of work for six months or more. That's why extending unemployment insurance benefits is going to be so important when Congress comes back in -- in session.
And, finally, if we look at the fraction of people in employment who in part-time employment because their employers cut their hours, or people who have simply given up work because they are discouraged about any opportunities in their town to find employment, and we add those to the officially unemployed workers, we have an underemployment rate of 16.8 percent.
So, one in six workers in this country at the moment is either out of work or significantly underemployed.
RAY SUAREZ: Well, many economists are saying that the economy is already growing. They project growth for the fourth quarter of this year and the first quarter of next -- next year. So, they're saying the recession will be over, but job losses will continue.
Why does that happen?
LISA LYNCH: Well, what happens when you start having a recovery in demand and people start producing more goods, what they ask their workers to do is two things, first, to work harder.
And we saw earlier this week, in the productivity report, that there's been a dramatic increase in labor productivity in this country. And, secondly, employers are going to increase the number of hours that currently employed workers are working first, before they take on new labor.
So, it's going to be a long while before we see the unemployment rate starting to decline. And, on top of that, we have new people constantly coming into the labor market. We're a growing population. Just to keep steady, we need to -- with our population growth -- we need to add about 120,000 new jobs a month to have no further deterioration in the unemployment rate.
So, we're still a long way from making any significant dent into the large numbers of workers that are out of work.
Job prospects for 2010
RAY SUAREZ: But is there hope for 2010 embedded in what you just described? Bosses asking for harder work, more hours from individual employees, is that something that has a short life cycle, where, eventually, work forces have to be added to?
LISA LYNCH: Well, there's only -- you know, you can get to a point when you are wringing out a dry towel and no more water is going to come out of that tower -- towel.
So, when you see such a big increase in labor productivity, some economists have pointed to that as an indication that employers are going to have to start hiring some additional workers.
We also saw in the report earlier this week on labor productivity that companies are now starting to report some profits. So, they have some cash in hand and don't necessarily have to wait for the bank to give them a loan.
So, as we go into 2010, as the financial crisis eases, as companies have access to credit, as profits go up, in principle, they have the resources to begin to hire additional workers.
But we will see if we end up having a repeat of what happened after the 2001 recession, where that got labeled as the jobless recovery. It may. We're probably into a U-shape recovery on the labor market front and not a V-shape recovery.
An older workforce with fewer teens
RAY SUAREZ: This week, we also had reports and new data talking about who's in the work force. And it turns out a lot of older workers are postponing retirement. And, at the same time, younger workers are facing some of the highest unemployment since they have been keeping statistics.
Are these two things related or just individual aspects of this job recession?
LISA LYNCH: Well, the teenage unemployment rate, for example, in August was over 25 percent, so, one in four teenagers out of work.
And, when you look at workers over the age of 55, we have seen a dramatic increase in their labor force participation rate. That's a trend that started back in the mid-1990s, went through the 2001 recession, where, typically, in a recession, you would see older workers dropping out of the labor force, opting into early retirement.
And the same pattern has played out in this recession. Workers are not dropping out of the labor force. They're staying in. Now, part of that has to do with the fact that, with a higher fraction of workers dependent on defined contribution plans, their 401(k) plans, we knew at the -- in 2007 that for workers close to retirement, only about half of them reported having more than $40,000 in savings. That was in 2007, before the financial implosion of many of our 401(k) plans.
So, you can imagine how workers who thought they had some resources in place to retire then realize they don't have that, delay retirement. Maybe they are not getting employer coverage health care that, in the past, they might have gotten, and, you know, anxiety in general. They're staying in.
They're also very skilled and experienced workers. So, employers, when they do have an opening and they choose between a teenager and a more experienced worker, all else equal, will choose the experience over the inexperience.
RAY SUAREZ: Dean Lynch, thanks a lot for joining us.
LISA LYNCH: Thank you, Ray.