Unemployment Update

RAY SUAREZ:

The improvement in the September unemployment rate surprised many analysts who had predicted a worsening jobs outlook. So how does today's report spell some unexpected good news for the U.S. economy or cast more uncertainty on the already sluggish recovery? With me now are Ron Bird, chief economist with the Employment Policy Foundation, a non-profit educational and research organization, and Rebecca Blank, an economist and dean of the Gerald R. Ford School of Public Policy at the University of Michigan.

Well, Ron Bird, two different data sets telling us slightly different things: One, with a lower rate of joblessness, another saying that businesses and government shed 43,000 jobs in September. What does that tell you?

RON BIRD:

Well, the difference between the household survey results and the establishment survey results is not surprising. We typically see in a number of months, those numbers moving in different directions. The change of down 43,000 from August and the payroll survey numbers is not a large number in the context of 130 million employee economy. The good news was an increase of about 700,000 in the estimate of employment based on the household survey. Both cases you're dealing with surveys and estimates. Essentially the economy is moving along at a slow recovery rate — the unemployment rate staying about what it has been for several months.

RAY SUAREZ:

But that drop in one month's time, 0.3 percent. You mention it is a large number of jobs in a very big economy. It adds up to a lot of people.

RON BIRD:

Well, if you are talking about the payroll report that was 43,000 down out of 130 some odd million, so that's not a huge number. Of course any number is unfortunate. We want to see the economy growing. What we really need to do is see the economy back in the situation it was in a few years ago creating large numbers of new job opportunities.

RAY SUAREZ:

Rebecca Blank, when you look at those two different reports, saying at first blush contrary things, what do you make of the numbers?

REBECCA BLANK:

It's hard to make a lot of this month's unemployment numbers — as Mr. Bird noted, these changes — which is simply small — The Bureau of Labor Statistics really said no significant change. The interest in looking over a slightly longer time period and if you compare today's numbers to three or four months ago, unemployment is down and the overall employment numbers are actually up slightly. Now unemployment tends to be a lagging indicator and what is puzzling here is that the employment side is looking better, but a lot of the leading indicators are actually turning down. And the real question is where are we going in is the leading indicators leading us and is employment going to go back up again, or does this employment situation herald good news? I'm afraid we just don't know yet.

RAY SUAREZ:

Given that the unemployment rate is a fairly gross number, sort of the work force seen from 35,000 feet, when you break out different sectors, what do the finer grain numbers tell you about what's up with American workers?

REBECCA BLANK:

I'm particularly interested in looking at the more skilled versus the less skilled workers. And there I think the news is that I'm very surprised actually at how low unemployment has stayed for everyone, but particularly for the least skilled. If you look at high school dropouts, their unemployment rates hovered at 8 percent, in comparison to double digit unemployment rates during much of the '80s and early 90s. The numbers still look good despite the economic slowdown. Some of the reasons for that is people dropping out of the labor market as opposed to looking for work. But the unemployment numbers in general, they look pretty similar across industries. There's not one industry that jumps out at you as being a lot worse.

RAY SUAREZ:

Do you agree with that is this.

RON BIRD:

I was glad to hear Professor Blank talk about the skills issues because in fact that's the central thing that I believe we need to be concerned about in this economy. 60 percent of the unemployed today are people with a high school– only a high school diploma or less. Another 25 percent of the unemployed have a smattering of post-secondary training but have not finished any sort of degree program in a systematic way. The job opportunities that have been growing in the past 10 years have been job opportunities for people with skills, people with education, and it's that need that we need to address if we want to improve the outlook and for the unemployed and get the economy growing again.

RAY SUAREZ:

But when you say we need to address that, what an 18-year-old without a high school diploma does might be fairly simple. What a 32-year-old without a high school diploma does, is what?

RON BIRD:

That is an important consideration. One of the things we need to do is to think outside the box a little bit and think about ways to combine work with ongoing education, with continuing education, with returning to school.

RAY SUAREZ:

Those discouraged workers that you mentioned, Dean Blank, do we know how many of them there are cumulatively, how many there are out there in the 284 million Americans?

REBECCA BLANK:

We don't have regular data on discouraged workers. The short answer is no. What we do know is that they are heavily concentrated among the less skilled. That's the population you should worry about when unemployment rates start going up. A number of the discouraged workers appear to be older men who are going on to disability at higher rates than they were ten and twenty years ago. But there is increase among younger menace well. One can only guess what is happening there. My guess is a number of them are moving into underground economy jobs when they can't find mainstream jobs. That should be a real concern. You don't want to pull people out of the mainstream economy.

RAY SUAREZ:

If some of them came back on stream, became merely jobless instead of discouraged workers, how do jobs arise in the economy to soak up some of the demand?

RON BIRD:

Well, unfortunately in today's economy, the job opportunities for people with the least skills and the least education are few. On the other hand, if people have more skills, the job opportunities are there. During the last year, for example, during the recession, while total employment was, in fact, declining, we saw an increase of a half million over the year in employment of people with two-year vocational degrees. Clearly there's a demand for the skills there. We mentioned the discouraged workers — the discouraged unemployed, the hidden unemployed, the people who are not looking but would like to have a job. A couple of questions asked on the household survey get to that issue. One measure comes back at around 390,000 based on people who say that they are available to work, they would like to work, but they haven't looked because they just feel that there are no jobs there for them. A broader measure is people that aren't looking for but a variety of reasons, but have looked for work in the last year. That's 1.5 million.

REBECCA BLANK:

Can I jump in there?

RAY SUAREZ:

Go ahead.

REBECCA BLANK:

There is a big gender gap here that's important to look at. The discouraged workers are all focused on the men. If you look at the women over the last ten years, you see the opposite trend. Huge increases in labor force participation and no evidence in the current numbers and certainly not in the last ten years of numbers of discouragement. Some of that is due to increasing job opportunities for women. Some of that is due to very extensive welfare-to-work efforts. So again one of the interesting questions here is why are the men behaving differently than the women?

RAY SUAREZ:

That's a good question. Do you have any possible answers? When you look at how people behave in response to these trends, what are some of the possible answers?

REBECCA BLANK:

One possible answer is certainly our welfare reform programs where we've said to women in no uncertain terms, your safety net is disappearing and go get a job. Women have clearly responded to that. One of the things that strikes me is that while it's hard to find jobs right now, there doesn't seem to be a huge loss in jobs among a lot of the women who went out and found work in the mid-and late 1990s. If they would actually lose jobs and not be able to find others, the question of would they flow back into the welfare case load or what would they do becomes a very serious policy question.

RAY SUAREZ:

And states under the budget press yourself they're under now with the recession, they can't extend unemployment benefits that easily, can they, Mr. Bird?

RON BIRD:

Well, certainly the state's unemployment insurance systems are in, in 26 states, are operating below the recommended solvency guidelines for their trust funds. But just extending benefits is not the heart of the answer, I don't think. The issue we really need to address is getting the economy moving again. In some ways, 5.6 percent unemployment rate that we're looking at now, if you look in historical perspectives, you might say it's not that bad. It's not that high. It's lower than it was ten years ago; it's lower than it was twenty years ago. But the fact of the matter is we've seen, in the last five to ten years, that the last five years especially, that this economy is capable of a lot better. So we're frustrated to see the unemployment rate at what it is when we know it could be at 4 percent. And the key there is not band-aid approaches so much as getting the economy moving again getting the job creation engine started again by encouraging investment, and encouraging business to create new jobs and certainly by not doing things that put stumbling blocks in the way of job creation.

RAY SUAREZ:

Ron Bird, Dean Blank, thank you both.