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Unemployment Rising, but the North Country Seeing Some Improvements
by Paul Grasso, July 13, 2009
The most recent unemployment figures show the country and the State of New York continue to sag under the weight of the Great Recession. Closer to home, the North Country is actually showing nice improvements, thanks, in part, to new manufacturers taking root in Clinton County.
The American economy has long been a consumer economy. It functions well when people are spending. The challenge facing government leaders today is how to reinvigorate the economy when so many consumers are out of work and those that are working have changed their buying habits.
Experts are beginning to ask the following questions about the U.S. economy:
1. The American consumer has dramatically altered their spending habits. Is this change temporary, or will Americans return to their "big spender" ways?
2. Credit is much harder to get. Much of the American consumer's spending was based on "easy" credit. Will America need to return to the days of easy credit to boost spending?
3. By the time that this recession is over, the unemployment rate will likely be between 10-11%. Which industries will create the jobs that will lead the way to low unemployment rates?
4. The government debt is growing every day -- with no end in sight. How will the mounting debt affect the economy in the long-term?
Compounding the problem is the rising unemployment rate. When Congress passed the American Recovery and Reinvestment Act (ARRA) in February, it was touted as necessary to ensure that unemployment would not exceed 8 percent this year. Well, unemployment has already reached 9.4 percent, and most analysts now expect it to hit 10 percent or higher over the next year.
There are now more than five unemployed workers for every job opening in the United States. Some economists are predicting that the recession may end sometime this year, but that unemployment will continue to increase.
Additionally, the Center for Labor Market Studies recently released a report stating that there are 29.3 million "under-utilized workers" in America. An under-utilized worker is not one captured in the unemployment rate released by the government. These workers are reported as part of the government’Äôs U-6 unemployment rate.
The U-6 figure includes "discouraged workers." These people have stopped looking for work because they feel that the effort is a waste, and that there are no jobs available for them. Discouraged workers have looked for a job sometime in the past 12 months but have not been able to find one.
The figure includes "marginally attached workers." "Marginally attached workers" include those who are not currently looking for work, but have attempted to look for a job sometime in the recent past and would take a job if offered. Marginally attached workers include discouraged workers, and are not included in the "official" unemployment number because they have not looked for work in the past 4 weeks.
The USDOL reported that the June 2009 U-6 figure is 16.5% up from 10.3% in June 2008.
How do these figures relate to an economic recovery? Unemployed and underemployed people do not buy cars, homes, televisions, or computers. If the economy is going to rebound, it will require, in part, a dramatic decrease in the unemployment rate and the number of under-utilized workers who can produce the goods that consumers used to buy.
Closer to home, as reported by New York State's Department of Labor (NYSDOL), New York State's seasonally adjusted private sector job count decreased over the month by 20,400, or 0.3 percent, to 7,102,000 in May 2009.
The state's private sector job count has now dropped for nine consecutive months. Since the state's private sector job count peaked in August 2008, New York has lost 212,200 private sector jobs, erasing more than half of the 400,000 jobs added during the state's last economic expansion from 2003 to 2008.
After seasonal adjustment, New York State's unemployment rate increased from 7.7 percent in April to 8.2 percent in May (its highest level since February 1993).
The number of unemployed state residents jumped over the month by 51,000 to 802,400 in May, its highest level since July 1976.
"New York State remains in recessionary mode, as evidenced by the latest labor market data. Nonetheless, the state continues to remain well below the national unemployment rate," said Peter A. Neenan, Ph.D., director of the Division of Research and Statistics.
The United States is perilously close to topping the 10% mark for the first time in nearly 30 years. Not since September of 1982, has the unemployment rate climbed past the 10% mark. The unemployment rate remained over 10% for a full 10 months, topping out at 10.8% in both November and December of 1982.
It is important to remember that the unemployment rate is a lagging indicator, meaning that the numbers will continue to rise even after the recession ends.
Furthermore, if people are not working, or are under employed, they are paying less in taxes ’Äì personal income and sales tax. In news that should be a surprise to absolutely no one, the Nelson A. Rockefeller Institute of Government reported that nationally state tax revenues fell by a whopping 12.6% in the first quarter of 2009. The Institute reported that the bulk of the decline was due to a drop in personal income tax revenues, which dropped nearly 16% year-over-year. This was the largest decline in personal income tax revenues since 2002, which is when the last recession took place.
The report broke overall tax revenues down into three major categories: personal income tax, corporate income tax, and sales tax.
In New York, tax revenue is down across the aforementioned three categories:
Personal income tax revenue is down 20.8%;
Corporate income tax revenue is down 36.8%; and
Sales tax revenue is down 5.6%.
The problem with assuming that the US economy will soon rebound is that you first have to figure out a definitive answer to this question: Where will the growth come from? Which industries are going to absorb all of these unemployed workers?
Which industries are going to be the engines of growth in the United States over the next 10-20 years? Which industries are going to be putting millions upon millions of Americans to work over that time?
These questions, coupled with lukewarm predictions relative to economic growth, indicate to some that we may see to increase the only minimal or limited job growth in the near future.