Jobless Jump

MARGARET WARNER:

Today's higher unemployment numbers painted a far gloomier than many analysts had predicted. The new 6.4 percent rate reflects a net loss of 30,000 jobs in June, and a revised loss of 70,000 jobs in May. Hardest hit was the manufacturing sector.

The rate also reflects a growing number of people actively looking for work. June saw an influx of more than 600,000 new job-seekers into the labor market, more than employers could accommodate. To help us understand what these numbers mean, we're joined by Rebecca Blank, an economist and dean of the Gerald Ford School of Public Policy at the University of Michigan. She was a member of the Council of Economic Advisers during the Clinton administration, and Rick Cobb, executive vice president of Challenger, Gray, and Christmas, a firm that specializes in job placement for executives, middle managers and hourly workers. Welcome to you both.

Rebecca Blank, this is the biggest one-month drop in percentage terms since right after 9/11. We've seen five months of steady job losses. Where are all these jobs being cut? Who's losing their jobs?

REBECCA BLANK:

It's interesting. Up until now, in this slower growth economy, many of the losses were spread across all sectors of the economy. In fact, college-educated workers saw their unemployment rate go over 3 percent, which is pretty high for that group and stay up there for much of the last year.

The last couple of months, and particularly this report, changes that. What we're seeing now in these last few months is a much more traditional pattern that we often see in recessions where it's the least skilled and the lowest waged workers who lose their jobs. If you look at this report, the big jumps in unemployment are among people who are less skilled, they're among people who are in blue collar jobs, they're among teenagers — black male teen unemployment is now up to almost 40 percent again, a number we haven't seen in quite a while. They're among persons of color, among blacks and Hispanics.

MARGARET WARNER:

And they're people working, what, at hourly wage jobs?

REBECCA BLANK:

Largely, yes.

MARGARET WARNER:

And Rick Cobb, where are the bright spots? There were some job gains that offset some of these losses.

RICK COBB:

The stable parts of the market have been the legal environment, insurance, different sectors in financial, as well as the social work and the security-related industries.

MARGARET WARNER:

And weren't leisure jobs and housing-related jobs also up?

RICH COBB:

Well, there was a spike in housing, certainly, because of the interest rate declines, and that's been sort of a lagging indicator.

MARGARET WARNER:

What would you add to that, Rebecca Blank, in terms of where the bright spots are?

REBECCA BLANK:

Well, one of the interesting issues here is actually we've opened up a gender gap in the labor market in favor of women with regard to employment. If you look at this particular report, there's a bigger gap in favor of women on unemployment rates than I've ever seen. It's almost a full percentage point, and that also reflects the real diversity of this particular slowdown. It's the consumer sector and health care sectors that are doing okay, and that's where women are disproportionately employed, while it's manufacturing and the import export sectors that are doing worse, and that's where men are disproportionately employed.

MARGARET WARNER:

Rick Cobb, there was another interesting statistic that we just used in the introduction, which was that there were more than 600,000, in fact, more than 600,000, additional people flooding into the job market. What does that tell you?

RICK COBB:

One of the things that we've tracked since 1989 is the actual number of announced layoffs. When a Fortune 1000 company makes an announced layoff, that layoff may not actually occur for anywhere from 60 to 120 days. One of the things that you'll see, then, as these companies go through these reductions, it comes out over time, as their businesses move offshore or as their manufacturing environments begin to take up the orders and build slack.

MARGARET WARNER:

But do you think these people that are coming into the job market now…is it — some analysts I read today were saying, "Well, they were listening to the talk about the market was improving and so on and they were getting sort of optimistic there might be jobs out there, so after a while of being unemployed, they came back into the market." Do you see that?

RICK COBB:

I don't know that we see that as much. One of the things that we're going to see, as we look at our announced layoff data, which is trending down, and that that's a leading indicator, which says to us after two months, it's possible we're approaching the bottom, is that when the economy actually does start to turn around, if it does, that you won't see this radical reduction in unemployment because there are so many people in the market, one, who've come back to market; two, who are underemployed who will fill positions that might be taken by somebody who's legitimately unemployed.

MARGARET WARNER:

Rebecca Blank, how do you interpret the greater number of people going into the market at least? Looking for a job?

REBECCA BLANK:

Yes, I agree with Rick. But there's another thing that's going on here as well. If you look at this report, there's a growing increase in the number of unemployed workers who've been unemployed long term and we define long-term as more than six months, more than half a year without a job. And one of the things that you typically see happening when long-term unemployment rises, is that families who thought they could ride this out suddenly realize that they can't, and both the unemployed person, you know, who lost their job actually starts pretty actively looking or second or third workers, spouses or children start looking for jobs as well. And I think that's one of the things that's happening.

MARGARET WARNER:

So you think in fact it reflects perhaps a little desperation or need to get a job?

REBECCA BLANK:

A little more pain, yes.

MARGARET WARNER:

Mr. Cobb, what do you think this says about the economy, the state of the economy overall? I mean is this a very significant bad news kind of a figure, the 6.4 percent unemployment, that really flies in the face of some of the good news we thought we were hearing the last couple of months?

RICK COBB:

Well, I think it's a wake-up call to the idea that the unemployment data by itself isn't the way to predict the economy. Certainly, as you look at…we are still in a recession, but there are signs of a turnaround. Now, the market tends to try and lead that turnaround by guessing when to get in. There's a lot of money on the sidelines that wants to get in and participate. One of the things that you'll run into, though, as I said earlier, is that as things flatten out, you'll have the temporary employee, which will be a stop gap measure for manufacturing and other industries, rather than bringing on full-time employees back, they'll use the temporary industries first. So if we're looking for legitimate turnaround, we look for a slowdown or a reduction in the number of announced layoffs, followed by an increase in activity in temporary services.

MARGARET WARNER:

What are you finding right now with the companies that you talk to all the time as you're trying to place people? What kind of workers are they hiring and why aren't they hiring more?

RICK COBB:

Well, as I said before, one of the things that you worry about is if you have a spike in your business and you actually have an increase, that's not necessarily guarantee of a long-term turnaround. There are a lot of global events which impact industries. You look at the telecommunications industry, or the apparel industry, where the advent of the SARS epidemic froze all of their inventory overseas in isolation. So there's no way to predict those. What you'll see, then, is you'll see companies being a lot more cautious. They'll hire more in a cost-control and retention area where they can actually hold on to their business, or if they're going to try and deal with a spike in business, an increase, they'll try to do with it temporary services on a part-time or project basis.

MARGARET WARNER:

And is that what you're seeing with companies that you deal with? For instance, when they come to you, they want contract workers, rather than full-timers?

RICK COBB:

Well, I think what we're looking at, we're dealing with a population of management and executives who are legitimately unemployed. One of the things that we advise them is that in a down company, economy is 100 percent for anybody, regardless of your level. It doesn't matter what the economy's doing. The only real security– or the only real way to control your job search is to be aggressive about it. Even in a down economy, as companies continue to reduce, they may reduce a department from 50 to 15, but those 15 people will have to have different skill sets than probably the 50 that they had. So if you look at a reduction in an organization, there will be opportunities created in that reduction by the fact that the skill sets have to be broader and deeper.

MARGARET WARNER:

Rebecca Blank, what do you think these numbers mean about the overall state of the economy?

REBECCA BLANK:

Well, they certainly aren't good news. It is true that the labor market lags the overall economy, and we've been in a number of recessions where– in the past where the labor market is at its worst right before the recovery starts up. And of course that's what the optimists want to see happen, and there are a lot of people who are projecting pretty strong growth for the second half of this year. On the other hand, the more that you see long term and widespread unemployment, of course, the harder hole you have to dig yourself out of. And I'm not quite as optimistic as that. I think these numbers signal this we're probably going to be in a slightly slower economy for a little longer than many people would like.

MARGARET WARNER:

And what's your assessment of what it takes– I mean and this is a macro big-picture question, but– for companies to really start hiring new full-time workers benefits, the full job, not temperature primaries, not contract workers?

REBECCA BLANK:

Yeah, I mean there's several things that can drive that. Of course you can be helped by your partners overseas and that's not going to happen because they're in worse shape than we are. We're not going to get a lot more out of consumer spending. We can't bring interest rates very much lower, so that you've got to be hanging a lot here on sort of changes in confidence about what's happening, that the war is over, that the economy's going to look up, that things are going to get better and that's going to drive the private sector into sort of increasing investment. You've also got to hang a lot of those tax cuts and I hope that that is going to help. Of course the tax cuts aren't necessarily going to help the group that have most recently become unemployed.

MARGARET WARNER:

All right, Rebecca Blank and Rick Cobb, thank you both.