smart spending

Jobs report: Scarier than you think

Unemployment line
Highlights
  • "The problem is a lot worse than the official numbers are telling you."
  • There are 15 million people looking for jobs without much luck.
  • Educated people are more protected from harsh economic winds.

The nation's jobless rate slipped to just below 10 percent last month, and while that sounds like good news, the story behind the numbers paints a scarier scenario.

Although the jobless rate slid to 9.7 percent in May, according to the Bureau of Labor Statistics, it's thanks to about 411,000 Census employees who temporarily hopped on to government payrolls for part-time jobs that won't outlast the summer.

Behind the numbers
The economy added 431,000 jobs, but here's what that number doesn't show:
From last monthFrom last yearSince the Recession
start (Dec 2007)
Have jobsdown 35,000down 1.1 milliondown 6.8 million
Can't find jobsdown 287,000up 455,000up 7.3 million
Gave up lookingdown 114,000up 291,000up 720,000
Could only find part-time workdown 343,000down 239,000up 4.1 million
Been out of work for over 27 weeksup 47,000up 2.7 millionup 5.4 million

"The problem is a lot worse than the official numbers are telling you," says Andrew Sum, the director of the Center for Labor Market Studies at Northeastern University in Boston. "These numbers are scary."

Because while there are 15 million people who are looking for jobs without much luck, there's something even more troubling. It's that almost half of them -- 6.8 million according to the report -- have been plagued with long-term joblessness lasting more than 27 weeks. As time passes, not only do out-of-work people grow dependent on expensive social programs, such as unemployment and food stamps, but their outlooks on the personal and professional fronts are bound to deteriorate.

"Generally we find that when people stay out of work for long periods," says Sum, "they'll just quit looking for work."

Discouraged workers quit looking

Many already have. The number of people who threw up their hands and just decided that looking for a job wasn't worth the trouble -- they're called discouraged workers -- clocks in at 1.1 million in May, according to today's report. The number of Americans in that group is down slightly from last month, but still up 36 percent from this time last year and up 198 percent -- that's not a typo, it nearly tripled -- from the onset of the Recession in December 2007.

These people are not counted in the seemingly improved unemployment rate the government presented this morning because by the labor department's definition, an unemployed person has bothered to look for work in the past four weeks. But it's safe to assume that most discouraged workers could really use a paycheck.

"When that happens you end up with terrible things," he says. "These people have to be financed. A lot will go on welfare, and many end up with mental health problems and depression. It's a costly proposition for the rest of us."

No choices except part-time work

In the meantime, the Census jobs helped soothe another section of the report: the number of people in this country who have had no choice but accept part-time jobs even though they really want to work full time. What's left are some 8.8 million people who have decided that half a paycheck is better than no check at all, and most of them are blue-collar workers or those with lower-paying service jobs, such as food preparation, says Sum. Slicing their salaries by some 50 percent has alone sucked $148 billion from the economy, he estimates.

"I call it the 'Blue Collar Depression,'" says Sum. "What we find is there's an enormous differential depending on schooling level and occupation."

Who has it worse?
The country's unemployment rate was 9.7 percent in May, but it's a ratio that's not created equally.
These groups have it worse:These groups have it better:
Unemployment rateUnemployment rate
Teenagers26.4%Married men6.7%
Adults, no high school15%Women, over age 257.6%
Single mothers11.6%Part-time workers6.7%

Education makes a difference

So yes kids, please stay in school. Educated people are more protected from harsh economic winds: The jobless rate for adults with a bachelor's degree and higher is 4.7 percent, while high-school dropouts have a rate of 15 percent. But also because, since last month, the construction industry lost another 35,000 jobs and retail trade lost 66,000 positions. The financial industry lost fewer positions -- just 12,000 jobs -- while information employment didn't budge and education and health services added 17,000 jobs.

Says Sum: "If you take away Census jobs, we're left with nothing."

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