Rising Unemployment

RAY SUAREZ:

For a closer look at today's numbers and the people and the companies behind them, we turn to Cecilia Conrad, an economist at Pomona College in Claremont, California; Marilyn Mackes, executive director of the National Association of Colleges and Employers; Alan Krueger, professor of economics at Princeton University and an economic writer for The New York Times; he's also former chief economist for the Department of Labor; and Jerry Jasinowski, economist and president of the National Association of Manufacturers.

Well, Alan Krueger, let me start with you. When you look at today's numbers, what do you see and what do you make of it?

ALAN KRUEGER:

Well, today's numbers were very weak. It's hard to find the silver lining in the numbers that came out today. The unemployment rate increased to four-and-a-half percent; the loss in total employment was almost a quarter of a million jobs; manufacturing led job loss, but job growth was soft outside of manufacturing; temporary help; temporary help sector had a big loss, so this was quite a grim report.

RAY SUAREZ:

When you look at a wider time frame, though, four-and-a-half percent is still pretty good. Should we — or should we look to pay a lot of attention to one month's numbers?

ALAN KRUEGER:

Well, I think you're absolutely right. One shouldn't pay too much attention to one report. But this — and four-and-a-half percent unemployment is a very low number in historical perspective. On the other hand, the last couple of months have been soft, and this report weakens my view of how the economy is doing.

RAY SUAREZ:

Cecilia Conrad, in California, the last recession hung on longer. The jobs recovery took a little longer to get here. Is California still out of cycle, or is it leading the way this time?

CECILIA CONRAD:

Oh, it's still a little bit out of cycle, but I do see some trouble in these numbers. Some of the softening, as Alan mentioned, has taken place in the services sector, although there was job growth in computer programming services; it's much softer and much smaller rate of growth than we've seen in the past. And even in the temporary help supply, which most people don't realize a big part of that is actually high tech labor, people who are being hired out as computer programmers and so on; that drop off for me spells trouble.

RAY SUAREZ:

So did the temps get hit first? Is that one of the places the canaries in the coal mine that you look for .

CECILIA CONRAD:

Definitely. I think when you look at this sector, because they have relied quite a bit on outside labor to help supply some of the gaps that they've had historically, just a year ago we were talking about shortages in this labor market, and I think that's not something we're going to hear a lot about this summer.

RAY SUAREZ:

Jerry Jasinowski, as we look at the country as a whole, is it your members who are shedding a lot of these jobs?

JERRY JASINOWSKI:

Well, manufacturers have been shedding jobs for some time, but what's particularly disturbing about this report is how big the number is, how 100,000 of it's in manufacturing layoffs, but a lot of it's also in electronics and technology as was just referred to. And then you've got the temporary help, so it's now clear that the manufacturing layoffs have come to technology and they've come to the service sector. And, as a result, I think we're looking at very slow growth in the first and second quarter of this year, and that's very troublesome.

RAY SUAREZ:

When you refer to 100,000 out of the total number, that's 100,000 out of 223,000 jobs lost nationwide. Are these jobs that you'll likely be rehired if things show a sign later in the year, or will companies be slower to rehire and quick to shed at the sign of trouble.

JERRY JASINOWSKI:

It's a very good question. Basically, we rehire people in the American economy. We've seen that. But in order to do that, as you know, you've got to have high growth, and growth is now one percent or 1.5 percent, and you've got to be substantially over two percent growth in order to get decent employment gains. So I don't see people picking up their hiring soon — because it's going to be the third quarter before you get any kind of decent growth and maybe even fourth, and I wouldn't look for employment to strengthen this year very much at all.

RAY SUAREZ:

Marilyn Mackes, the last time you were on this program, you were hear to talk about the white hot employment market for college graduates. For those people who are hitting the labor pool this week, next week, into June, what's waiting for them?

MARILYN MACKES:

Well, this year's class of 2001 is experiencing a different market than the classes for the last two years. Obviously, we had a white hot market, and it was a very robust economy. Even in the fall — when we surveyed employers across the country that are hiring college grads, and they projected about a 23 percent increase in their hiring. When we surveyed them again in March, that was decreased down to 18 percent. But that still does represent an increase. Now, what we've seen on the campuses in terms of real interviewing and offers is that, in fact, the fall was an incredibly busy recruiting season and the spring has slowed down somewhat. We're still finding, though, in a recent survey that we did with employers that they're still describing the college market as still very competitive. They're rating it at about a four out of one to five, five being the most competitive in terms of getting the kind of candidates that they need for the marketplace.

RAY SUAREZ:

Last year there were reports of sort of an employment equivalent of panic buying, companies snapping up graduates that they weren't even sure how to use yet, people being a little bit more cautious this spring?

MARILYN MACKES:

Absolutely. It's going to be a little bit tougher for candidates — they need to market themselves more effectively, and obviously, as some of the other panelists here have described, and employers are going to be more selective. I will say that even in times when there have been cuts in industry and business and services areas, etc., there has still been new hiring because it's very important to keep that fresh blood coming into the organization, bringing in new skills and capabilities, but at the same time obviously what we're seeing is that employers are going to take a little bit more conservative approach.

RAY SUAREZ:

Alan Krueger, help me with these numbers a little bit. When you get a monthly unemployment report where the job losses are four times higher than the previous month, from a statistical point of view, do we throw that out as an aberrant month; do we wait till next month to get a more typical track for this job market?

ALAN KRUEGER:

Well, I think it's important to take each month in perspective and to weight it against what's been going on in recent months. A big movement in one month, of course, could be a statistical blip. But today's number comes on the heels of some other weaker reports. The general picture in the labor market does look like softening. Now, of course, I think the situation could change, so I think one has to bear that in mind, but the general pattern seems to be one of softening in the labor market.

One thing I would add is an interesting development this month and last month is that the unemployment rate for college graduates has increased. Now ordinarily the unemployment rate is quite low for college graduates, even in a downturn. And usually when the economy starts to slow down, the unemployment rate increases most for high school dropouts, high school graduates. The last few months we've seen a sharper increase in the unemployment rate for college graduates who are 25 and older, so this might be related to some of the tech slowdown issues, and it's something to watch because I think it makes this current phase of the business cycle unusual.

RAY SUAREZ:

Cecilia Conrad.

CECILIA CONRAD:

I was just going to add in a way there's a possibility here of sort of a trickle-down economic slowdown. We usually think of trickle down in the context of economic advance, but what we're seeing here is that in the sectors like computer programming services and in the high tech, these are sectors that have put high demands on college educated labor. And as Alan pointed out, we've seen a little bit of unemployment rise there, and as a consequence of that, it took a while in California, but the growth in that sector spurred growth in other sectors because people started to demand services. They started to eat away from home, this printing and publishing, and all those types of auxiliary services that tended to use less skilled labor. So what we see now happening to college graduates may be an ominous sign for people with less education as we look to fall.

RAY SUAREZ:

So trickle down meaning that the job cuts are seen first in the white collar, managerial, technical ranks, and then only after in other places in the work force?

CECILIA CONRAD:

That seems potentially what's going on here.

RAY SUAREZ:

Do you see that, Jerry Jasinowski?

JERRY JASINOWSKI:

Well, I think a little bit, but again the cuts in jobs are so broad based in this report. You've got manufacturing, factory floor workers; you've got some people who are in the salaried clerical area; you've got service workers, so I do think that obviously labor markets are pretty soft across the board, and, again, economic growth is probably in the range of one percent. So I think that we're seeing cuts pretty broad, and I think that's going to continue to through the second quarter.

RAY SUAREZ:

Marilyn Mackes, you were going to jump in before?

MARILYN MACKES:

I was going to say that in terms of seeing the unemployment increase for people who are college educated 25 and over, and it's not surprising to see that, especially with what's been happening in the dot-com area. We know that a lot of fresh grads have found in the last five years — have found that area highly attractive, and they've been jumping from organization to organization, so it's not surprising to see that they're affected by that.

I think one of the interesting things that is going to come about is that there's been a lot of question about these new hires that have gone to work in these kinds of organizations, and their sense of loyalty and all that sort of thing, that we're in a whole new world of employment. I think it would be interesting to see what happens as a result of what we're experiencing now in terms of people's approach to work and the kinds of organizations that they want to be a part of.

RAY SUAREZ:

I noticed in the wage — starting wage reports for new graduates, Marilyn Mackes, that teaching had some wage growth, but even with the tremendous demand that's coming on stream, it lagged a great number of other areas of employment.

MARILYN MACKES:

Yeah. Actually, surprisingly, even though we are in this kind of slowdown economy, the starting salaries for many of the disciplines that are out there, like, you know, computer science and computer engineers, some of those are in the eight to ten percent increase range. Our business majors are making somewhere between five and eight percent, accounting, finance, marketing, and even our liberal arts graduates — it's a little early to say at this time — we usually get that data in later — even they are experiencing pretty good increases in terms of salary.

RAY SUAREZ:

And Alan Krueger, why don't you take us home. What should we be looking for? What numbers should we be paying close attention to in the coming weeks?

ALAN KRUEGER:

Well, the unemployment report is usually a coincident indicator — doesn't necessarily tell us where we're going in the future. The "help wanted" sector is often a harbinger of what's to come, sort of to help supply temporary work, and that was weak and has been weak in recent months. So that's one thing to look at. Looking at the unemployment insurance claims in the near future is something to focus on, looking at the inflation numbers, if the inflation numbers are under control then I think it's probably more likely that the Fed will move to try to stimulate the economy.

RAY SUAREZ:

Guests, thank you all.