STATEMENT BY CHAD STONE, CHIEF ECONOMIST,
ON THE FEBRUARY EMPLOYMENT REPORT
Today’s employment report
adds to the mounting evidence that the economy is too weak to avoid more
unemployment and shrinking job opportunities in the months ahead. Rather than
wait too long, as it has in similar situations in the past, Congress should
quickly enact temporary extended unemployment insurance (UI) benefits to support
the economy and to assist workers who have sought work for more than half a year
and exhausted their regular UI benefits.
The report shows that the
labor market weakened further in February, and a growing consensus of
forecasters, including the Federal Reserve, sees further softening in the near
term. As Federal Reserve Chairman Bernanke said recently, the risks to the
economy are on the downside and include the possibility that the labor market
may deteriorate more than is now anticipated. The apparent hint of good news
from the edging down of the unemployment rate is illusory, because it was part
of an overall decline in labor-force participation: the proportion of the
population with a job actually fell in February, and payrolls shrank.
Labor market conditions are
already harsher, especially for the long-term unemployed, than on the eve of the
last recession in March 2001.
- The unemployment rate is
higher (4.8 percent compared with 4.3 percent) and most forecasters expect it
to rise further in coming months.
- The percentage of the
unemployed who have been looking for a job for more than half a year and are
still out of work — the group that extended unemployment benefits target,
because regular benefits end after 26 weeks in most states — is much higher
(17.5 percent compared with 11.1 percent in March 2001).
- Due to these facts, the
long-term unemployment rate is nearly twice as high.
- Labor force participation
is lower. Moreover, 4.8 million people who are not in the labor force say they
want to work (13 percent more than in 2001). Many of them would presumably be
looking seriously for a job if they thought they had better prospects of
finding one, in which case the unemployment rate would be higher.
Weakness and further
deterioration in the labor market are sources of concern not only for the
long-term unemployed and their families but for the economy as a whole. Job
creation has ground to a halt — there are fewer jobs on employers’ payrolls now
than there were three months ago — and the Labor Department’s most comprehensive
alternative unemployment rate measure — which includes people who want to work
but are discouraged from looking as well as people working part time because
they can’t find full-time jobs — has risen almost a full percentage point in the
past year and is more than 1½ percentage points higher than it was at the start
of the last recession. When workers lose their jobs and then exhaust their
unemployment benefits before they can find new jobs, they cut their consumption,
deepening the economic downturn.
Congress did not include a
temporary extension of unemployment insurance benefits in the recent stimulus
package. Quick action would help the people hardest hit by the weakening economy
and would boost the economy with one of the fastest acting and most effective
forms of stimulus available.
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