The most recent data on the U.S. economy continues to be worrying, but a little context remains helpful.
Jobless numbers released in the past week tell the story of a deepening recession. Nationally, the rate climbed to a seasonally adjusted 7.2 percent. To place this in perspective, that means that for every 1,000 persons who want to work, 72 do not have a job.
However, only 13 to 15 of these 72 are unemployed because of the recession. The remaining unemployed are part of the normal friction of labor markets (though there’s solid evidence that workers are becoming less inclined to leave a job).
Indiana’s jobless picture is worse. Out of every 1,000 Hoosiers in the labor market, 82 do not have jobs. So the recession-related unemployment is somewhere between 25 and 30 workers out of every thousand.
The good news is that December is a poor month from which to judge trends. Retail, a big job creator, was hard hit and a significant proportion of auto-related manufacturers temporarily extended holiday closures.
The bad news is that November was also bad, and just about everyone expects little relief in the coming months.
A closer look at the data tells a deeper story. The labor pool is shrinking, albeit quite slowly. This reflects more retirements (possibly early retirements). Also, the areas with the highest unemployment rates saw their big plant closings last summer. This tells the familiar story that the full effect of layoffs that have just happened won’t be felt for several months because unemployment is a lagging economic indicator.
How this stacks up for Indiana is unclear. Most large layoffs (outside the automotive sector) are probably behind us. Few firms will have hesitated to cut workers, and January alone saw announced layoffs of 200,000 workers nationwide. If the automobile industry recalls workers in January, as many have done, the next couple of months will still be rocky, but not much worse than the three months we’ve just passed.
The automotive industry poses great uncertainty on Indiana, and the quick spike in unemployment rates is wholly due to this industry’s woes. Though Toyota, Honda and Subaru face tough times, they will emerge from this recession quite robust.
Their suppliers, many of whom are Hoosier firms, will share in this recovery. Ford will continue to do well with its new mix of fuel-efficient autos and the F-150. Chrysler, GM and their suppliers are another story. Until they face the discipline of bankruptcy, their future remains uncertain, volatile and hurtful to regional economies.
Despite all the talk about the increase in layoffs, the biggest increase in the unemployment data is the median duration of unemployment, which has grown by about a third-from seven weeks to more than 10 weeks.
In the past 11 recessions, job losses were at their worst right at the end of the downturn. We’re not there yet, but—barring another shock—we should be by summer.
Hicks is director of the Center for Business and Economic Research at Ball State University. His column appears weekly. He can be reached at email@example.com.