We are drifting. We take comfort in bits of good news, but we are in dangerous waters. The Great Recession is being starkly revealed as a global crisis with the United States, the traditional engine of recovery, sputtering on every cylinder. The government has responded with dramatic financial support by transferring money from Uncle Sam to the household sector. But outside of these transfers, the personal income of Americans is still declining, the housing market remains stagnant at best, consumer growth is nominal, and the only real energy in the economy has come from the cessation of inventory liquidation, which is now the major factor in the rising industrial output.
The mood of U.S. households is despondent. According to a survey in May, only 11.3 percent believed they would see their income rise in the next six months, while 16.6 percent thought it would decline. This downturn is the first time in over four decades that more people believe they will be worse off rather than better off. Any massive fiscal and monetary stimulus that might reverse the trend is likely to be politically unsustainable given the growing concern over our exploding national deficit.
Wherever you look, the scene is bleak. Leading economic indicators fell in April—unusual at such an early stage in the up cycle. Jobless claims were up by 25,000 to 471,000. And up again above expectations in the first three weeks of May—raising the four-week moving average to a level consistent with net job losses, typically 100,000 or more. For the last several months, the average of initial claims has been nowhere near the levels of 400,000 and under, which in the past were consistent with sustained job creation. The favorable jobs picture of the second half of last year has completely stalled out in 2010. So we are not enjoying the normal cycle of economic improvement. If we were, employment would already have reached a new high, making up all of the jobs lost, as it did after the previous postwar recessions. This time we remain short of the old peak of employment by an astounding 8.4 million jobs. One in six Americans is either unemployed or underemployed. This is not a normal cycle when compared to a typical recession, which sees no more than 2 million to 3 million jobs lost.
The outstanding research of David Rosenberg, the chief economist at Gluskin Sheff, reveals jobless statistics behind the headline numbers that are downright scary. Over 45 percent of the jobless (more than 6.5 million people) have not worked for 27 weeks or more, compared to 3.2 million this time last year. The average time between jobs has leaped from 16 weeks at the beginning of the Great Recession to about double that now. Adult male employment for those ages 25 to 54 (the group known as "breadwinners") has now fallen to where unemployment exceeds 10 percent, a level that has been maintained or breached for most of the last nine months, a string not equaled since 1947.
The median duration of unemployment has risen to 21 weeks and the average duration to 33 weeks, both 50 percent higher than a year ago and new all-time highs. The unemployment rate for college graduates under 25 is averaging 9.1 percent, whereas for high school graduates under 25 and not in college, the average is 22.8 percent. Among unemployed workers over 55, 51 percent have been unemployed long term, exceeding the national average of 46 percent.
Wages are falling and wage cuts are spreading as employers continue to pare costs and remain reluctant to hire. The plurality of employers are still in the process of shedding workers two years after the Great Recession officially began. And the amount of excess labor continues to increase. For example, April payrolls surged by 290,000 jobs but the labor force soared by 805,000. In effect, job seekers are overwhelming the number of jobs being created. The broader definition of unemployment, which includes partial unemployment and people who have applied for a job within the last year, is over 17 percent. Before the Great Recession, this metric had never gotten as high as 12 percent in the last 45 years. The headline unemployment rate is back up to 9.9 percent but this covers only people who sought a job in the previous four weeks.
Meanwhile, those working part time not by choice number about 9.2 million, and the total available labor force now stands at 21.2 million job seekers. This is testimony to the degree to which firms are willing to place full-time workers on part-time schedules in order to trim labor costs, a response to their concern over the durability of the recovery and the increasing cost of employer mandates such as healthcare. The number of job openings is just bouncing along the recession bottom.