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Stefan Karlsson

U.S. employment report observations

By Guest blogger / April 7, 2010

People wait in line to enter a job fair in New York on March 2.

Shannon Stapleton/Reuters

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Because it was Good Friday, not much happened in the economic world last Friday-Except for, of course, the U.S. employment report.

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As expected, it was overall relatively strong with significant gains in jobs and even greater gains in hours worked. However, this was largely related to the reversal of the weather factor that had depressed the February number, and also to Census 2010 hirings by the government.

The one really weak item was average hourly earnings, which fell by 0.1%, the first drop in several years. As it is difficult to see how the weather factor could have affected this, this was clearly a sign of weakness. It could however be a sign that the weak labor market are making workers more willing to accept lower pay, something which will depress the average hourly earnings number, but boost the number of employed people and hours worked. '

Another interesting factor is that the number of people unemployed for a long period of time (27 weeks or more( has risen significantly while the number of people unemployed for a shorter period of time (26 weeks or less) is falling significantly. Compared to the previous month, the seasonally adjusted number of long-term unemployed is up by 414,000, from 6.133 million to 6.547 million. Compared to 12 months earlier, the number of long-term unemployed has doubled, from 3.241 million to 6.547 million.

Meanwhile, the number of short-term unemployed has dropped to 8,31 million, down from 8,856 million the previous month and 9.92 million 12 months earlier.

Why has short-term unemployment dropped while long-term unemployment continues to soar. While there are probably several explanations for this, the likely most important one is the fact that the U.S. Congress has significantly expanded the duration of unemployment benefits. In the past, you could only get it for 26 weeks, but now you can get it up to 99 weeks (or in other words, nearly 2 years). This has significantly reduced the incentive for the long-term unemployed to accept jobs whose pay level or tasks they don't like, and as a result, they choose to stay unemployed rather than take jobs they don't like.

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