Experts Answered Your Questions on Slumping Job Markets and Economic Woes

Okay, so if we look at the new numbers that came out last week, and look at the downward revisions in the numbers from the two previous months, are we working on a trend from which it's possible to make some observations about the state of the job market?

BRIAN BETHUNE: Well, yes. When you look at the numbers that we received last Friday, what we see now is that, with respect to the establishment survey -- which is basically the survey that the Bureau of Labor does on actual businesses -- that now has shown a decline in private employment for three consecutive months. And that totals a decline of 141,000.

The household survey, which is another survey which is used to gauge what's happening in the employment markets, actually had a cumulative decline of 654,000, which is again, another three-month decline.

So, both the household survey and the establishment survey have indicated that there have been declines in total employment, now, for three consecutive months.

So, that's a pretty strong indication that, you know, overall there's some issues that the economy, in terms of overall activity, is declining, because as Professor Lynch indicated, usually the employment numbers are a lagging indicator and when you start to see declines -- sequential declines -- over several months, that's an indication that some kind of process has already started which is bringing economic activity down.

And I would agree with Lisa Lynch that that probably started -- the whole thing started in, around the August, September, October period, and then has been sustained for long enough that we're seeing, now, this decline in overall employment.

RAY SUAREZ: Deb Wilkinson writes, from Portland, Oregon, "I was told that the method of calculating unemployment figures by the U.S. government had changed, that many people are not counted, and the actual unemployment rate for American citizens working in the U.S. is much higher than reported. Finally, I heard the government does not count the homeless in the unemployment figure, either, which is going up dramatically during this financial crisis."

Professor Lynch, is this all true?

LISA LYNCH: So, the unemployment rate is calculated from a survey that, about 70 percent of the respondents are contacted by telephone, and 30 percent are interviewed in person. That the BLS does, the Bureau of Labor Statistics does, every month. This is a survey of about 60,000 households across the United States.

It's a representative survey of households with addresses. So, your viewer is correct in raising concerns about how the homeless are, or are not, included in this survey. Anyone who is living in a shelter, in a hotel, in prison -- these are individuals that would be part of what we would call institutionalized, or not at a permanent address, population, and they are not included in the sampling that's used to calculate the unemployment rate.

Now, that's not necessarily a huge number, a huge problem if you're looking at changes, as opposed to an absolute level of the unemployment rate over time, unless you are concerned that there have been big changes in people losing their homes.

Now, this actually came up as an issue during Katrina, where we had a lot of people displaced because of the hurricane. And in that situation, the Bureau of Labor statistics actually took some extraordinary measures to track evacuees, and to follow what was happening with them. Because they, then, by living in a shelter, fell out of the usual definitions that were used to track what was happening to individuals in the labor market.

But the household survey is a sample, they do try to make adjustments for people that are not interviewed in the survey to come up with a national projection for the unemployment rate.

RAY SUAREZ: Ann Kidalowski asks, from Clifton Park, New York, "When an unemployed worker is no longer looking for a job, how is he counted? Or is he just eliminated from the employment/unemployment equation? If and when he finds a job, how is he counted?"

Brian Bethune?

BRIAN BETHUNE: Well, if the unemployed person stops looking for a job, that doesn't -- they still count it as unemployed, as long as, you know, there, you know, that's in the overall establishment survey. So, that doesn't change, it just means that they're reclassified for being, you know, unemployed and looking for work, to unemployed and a discouraged worker, I think is the way they --

LISA LYNCH: They use the -- if you've been looking for work over the last 4 weeks, you'll be counted in the household survey as unemployed.

But if you stop looking for work, due to economic reasons, or other reasons, both of those categories of workers are reported by the Bureau of Labor Statistics and they report alternative measures of labor slackness that include those categories of workers in the monthly employment release.

RAY SUAREZ: Does the Bureau of Labor Statistics also use a fairly low threshold for considering someone employed? If you worked just a few hours last week, or a few hours each week of last month, are you considered employed, even if you might consider yourself drastically underemployed, or unable to find steady work?

LISA LYNCH: Well, here again, we -- there is some interesting changes that we've seen in this number that, in terms of trying to understand what's happening in our economy right now, it's quite important.

So, the official definition for employment status in the household survey is whether or not you've worked during a survey week, a representative week in a month, for one hour or more for pay, or for 15 hours or more in a family-run business or farm, without pay.

In the establishment survey, which is the second survey that Bureau of Labor Statistics uses to track employment trends, those are data that are collected from employers, where they just ask, "How many people are on your payroll?" And that will -- it's up to the employers to report how many people are officially on the payroll.

But, what we do see is a growing fraction of our workforce that report that they're working part-time for economic reasons, due to slack business conditions.

That number has grown by over a half a million over the last year, to the point we now have five million workers in the U.S. labor market who say, "I'm working at a part-time job, but I really would like to have full-time employment, and the only reason I don't have it, is because my employer says there's not enough demand."

Brian Bethune, let's take that first one. Aren't other countries feeling a downward trend?

BRIAN BETHUNE: Well, that very much depends on what specific area of the world you're looking at, but clearly in this situation where you have very high oil prices, which are quite a shock for the U.S. economy, because they are largely imported, for countries that are exporting oil or energy, actually, many of them are doing quite well.

For instance, even the Canadian economy is performing quite well in the past year, compared to the U.S. economy. It is showing some signs of slowing down, but overall, simply because a significant part of the Canadian economy is resource-based, that part of the economy is doing exceptionally well. And similarly, if you look at some of the OPEC countries in the Middle East, they're basically in a boom situation.

So, it really depends. Looking at the major industrialized countries outside of Canada, in Europe there's been fairly good growth in the past year, that has been partly related to some of the dynamics in the European zone, where a number of countries have joined the Euro-zone recently, and that tends to create a stimulus effect for that economy.

So, overall, Europe is doing reasonably well, and they haven't seen -- they're not quite as exposed to the kind of shocks we're seeing on crude oil, simply because they -- a large part of the price they pay is actually in the form of taxation. So, there's not quite as much of an impact when it gets to the pump.

Japan is probably not doing all as well as one would like. It's still got some structural issues, it's growing at a fairly slow rate. So, really in that situation, I would say that not particularly strong.

But, of course, once you get into the Asia-Pacific, overall, China being a very strong growth leader there, partly because there's a significant amount of investment going on in China, there's a lot of investment dollars being pumped into the economy, both domestically and foreign investment.

So, the Asia-Pacific region has been growing at very good rates, and it has not been -- been impacted as much by what we're seeing in the U.S. economy.

RAY SUAREZ: Well, you heard Brian Bethune talk about a lot of the rest of the world doing pretty well, under the circumstances, but Professor Lynch, if problems in the U.S. continue, hang in there for much of the rest of 2008 or even into 2009, are there places that haven't begun to feel the impact yet that might eventually be pulled down?

Are there places that are somewhat tied in with the American economy, where a couple of bad months they can weather, but a longer decline, maybe not?

LISA LYNCH: You mean, in the United States or outside of the United States?

RAY SUAREZ: Outside of the United States.

LISA LYNCH: Outside of the United States. Well, you know, part of this might have more to do with exchange rates between, for example, the dollar and the Euro. As we see the dollar declining in value with respect to the Euro, there are increasing concerns in Europe that this may potentially affect the competitiveness of European businesses that are very much engaged in exports.

That their products are being priced in a currency that's appreciating in value, and this may make it more difficult for them to sell those products, especially outside of the Euro market, or more generally within the European Union.

So that's, you know, one area where you might see that.

More generally, the United States is a gigantic consumer in the world. And if we stop shopping, that means that for countries like China and others that rely on us as an important consumer, that that's going to decrease demand for their goods.

RAY SUAREZ: Bobby Anderson asks, from Auburn Hills, Michigan, "The Michigan economy is suffering a lot from unemployment. Is there any other part of the U.S. where the economy is better?"

And while we've been disaggregating the globe, maybe we should take a look at the United States and see whether the job losses are uniform or whether the jobs cutbacks are more pronounced in some places than others?

LISA LYNCH: Well, let me say that we're going to get some data at the end of the month that will look for the month of February, what was happening at a state level, and we'll have a better sense of what's been happening on a geographic basis, when we have those data coming out.

But what is, has been true for this contraction of employment that we've seen -- it's been in, for example, in residential construction.

In one of -- we've had housing busts before in the United States, but one of the unique characteristics of this housing bust is that it has been much more diffused across the country, as opposed to being isolated in specific cities or regional markets.

So, this is something -- construction, employment and residential has been going down broadly across the United States. Employment in financial services, again, this is something -- because a lot of it was associated with the housing markets, again, this was something that in those areas of the country which have a lot of employment associated with financial services, that has been going down.

I think the concern is when you see decline spreading into other sectors, like the retail sector -- declines in employment there, that gives you pause.

Now, some good news might be coming at us with respect to the decline in the dollar. This makes the United States a very attractive place for people looking for a summer vacation -- especially if you're in Europe.

So, you may very well see gains in employment associated with tourist destinations in the United States, and growth in those sectors going forward into the summer.

And we also see continuing gains in employment in health services, and part of that also reflects the aging of our population.

And another area where we've seen employment growth has been in state and local government. The worry there, though, is as revenues decline to state and local government, they are going to have to start shedding labor.

And the worst-case scenario -- if the sub-prime crisis spreads into the municipal bond market, and municipalities have difficulty in raising money -- we'll see even greater employment shedding of labor by municipalities, going forward.

Brian Bethune, are there a lot of Andres out there?

BRIAN BETHUNE: I would say there are quite a number of people in that situation that have been through a situation where, you know, they've learned some skills, and then found, once they entered the labor market, that those skills weren't as much in demand as they had anticipated. So, things do change.

And, I think the individual here is taking the right approach, basically trying to diversify the skill set, so he's not relying exclusively on one set of skills. You know, obviously some sectors in the economy are up and some are down.

Actually right now, when you look at the current cycle, the IT sector is actually doing relatively well. There's been strong demand, overall, for personal computers, and other types of semi-conductors, worldwide, and the Silicon Valley industry in California has been doing quite well. So, they're, in fact, they're enjoying some relative strength, compared to the housing sector.

So, if I were this individual, I would dust off some of those qualifications that he earned back in, several years ago in the IT sector, and see whether there's something that's going on there. Because, that's -- that sector has definitely been hiring.

RAY SUAREZ: Stephen Glowacki writes, from Plymouth Meeting, Pennsylvania, "The Department of Labor does not include illegal aliens in their stats. I was working at a housing development several months back, and I would venture to guess that 60 percent of the men working there were illegal. Why is it that this fact is never brought up when looking at the economy?" What impact does it have?

Professor Lynch, I'm guessing that kind of research could keep you and a bunch of your assistants busy for a couple of years.

LISA LYNCH: And it does, and it's more than me -- it's many people in the profession.

So, so we have -- he's right in that we don't, sort of, ask as part of our surveys, "By the way, are you an illegal alien?" And you can imagine the chilling effect that might have if you say, "I am from the U.S. government and everything you say will be held in confidence. And, by the way, are you an illegal alien in this country?"

It is the case that, in both the household survey that we use to capture information about people in the labor force, there is a question that asks the respondents if they were foreign-born. Not asking anything about visa status, but it does ask if they're foreign-born.

And from that, we know that the workforce today in the United States -- 15 percent of the workforce of the United States is foreign-born. And a large part of the growth in employment that we've seen over the past decade, has been coming from immigrant labor.

Here in the state of Massachusetts, this has been an extraordinarily important part of overall employment growth in our State.

We also -- so we have some indication that, of the extent of people that have been born outside of the United States. Now, many of those people may very well be here, and are likely to be here for perfectly legal reasons. And we have always been a country that has tried to attract the best and the brightest from around the world to our shores. It's a very important part, I think, of our vibrancy in this economy.

So, there are attempts to try to back out from the current population survey, some estimate of what fraction of our workforce is illegal. But those are very difficult to measure over time.

And there has been some sense that since 9/11 that it has actually been more difficult for illegal aliens to both come in and to stay for longer periods of time. So, there is some discussion about, perhaps, this is actually less important today than it was, perhaps, during the 1990s, and during the big boom in the 1990s.

RAY SUAREZ: Brian Bethune, are there particular industries, particular regions, particular sectors of the economy where the presence of large numbers of undocumented workers have either bid down the price of labor or made it harder for legal residents and citizens to get work?

BRIAN BETHUNE: Well, I think in this environment that we've seen the past few years, there's been a substantial demand for these workers, in certain areas of the economy, particularly in construction and agriculture. And in that type of environment, particularly when construction was strong, and agriculture, of course, still is a very strong industry in the U.S. -- the availability of these workers is a great assist, actually, to the farmers, and that tends to reduce the cost of operating a farm, keeps the cost of food prices down.

On the construction side, when the construction market was booming, of course, there was substantial in-flow of undocumented workers, and that was necessary in the sense that, at the time there was strong demand for housing.

So, as the construction market, though, has come down, of course there's been significant shedding of undocumented workers out of construction, which is one of the problems in terms of measuring the overall status of the employment markets, is that when these workers get moved significantly from one area of activity to another, then it's very hard to measure what's going on.

But evidence seems to suggest that a lot of these workers have actually moved from construction, and there's still strong demand in the agriculture area, but also in the tourism, and leisure, and hospitality.

That being said, the average wage that they're earning in agriculture and tourism and hospitality would likely be lower than what they earned in construction. So, overall, even though they may be finding some work, the average wage levels are definitely under downward pressure.