Vol. 72/No. 32      August 18, 2008

The U.S. unemployment rate reached its highest level in three-and-a-half years, having climbed from 5 percent in April to 5.7 percent in July. The last time the jobless rate increased by that much in a three-month period was at the end of the 2001 recession.

The continued employment decline did not come as a surprise to economic analysts. “The labor market is likely to remain weak, if not deteriorate a bit further,” Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York, told Bloomberg before the Labor Department released its July report.

Workers were hit in July with further job cuts across the private sector, including in transportation, manufacturing, construction, and service industries. Overall factory employment declined 35,000 for the second month in a row, about 5,000 less than most economists expected. Construction lost 22,000 jobs, which was actually the smallest loss in that industry since October. And about 16,000 retail jobs were eliminated.

General Motors, which announced a second-quarter loss of $15.5 billion, will likely lay off another 5,000 workers by the end of the year. Unemployment in Michigan, center of the U.S. auto industry, now stands at 8.5 percent, the highest in the country.

United Airlines and American Airlines each announced they were cutting about 7,000 jobs. Starbucks said it would eliminate a further 1,000 jobs just weeks after the company announced its plan to cut 12,000 jobs worldwide.

As usual, the last hired have been the first fired. While overall joblessness has risen by 1 percent over the last year, the rate for both Black and Hispanic workers increased by 2 percent to 9.7 percent and 7.4 percent respectively.

Workers in the manufacturing and construction industries have borne the brunt of the mass layoffs. At the same time, work hours have remained stable in these sectors and currently stand at 41 hours and 38.7 hours respectively. In many service jobs, however, bosses have continued to cut back work hours to reduce their cost. This is particularly true in retail, where the current average workweek dropped to 30 hours in July, an all-time low since statistics were first kept in 1972.

According to the Labor Department, another 308,000 workers were unable to secure full-time employment and forced to settle for part-time work in July, bringing the total number of people involuntarily working part-time to 5.7 million. This is the highest number since the Labor Department changed the way it defined that category in 1994.

Only 37 percent of jobless workers received unemployment compensation in 2007, according to the Labor Department. This is down from 55 percent in 1958 and 44 percent in 2001. Part-time workers, people who didn’t earn enough money, and workers who were fired are among those who don’t qualify for unemployment compensation. Fewer than 15 percent of what the Government Accountability Office defines as “low-wage” workers, who have the highest rates of unemployment, receive compensation when jobless.
 
 
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