Meet the Author

Murat Tasci |

Research Economist

Murat Tasci

Murat Tasci is a research economist in the Research Department of the Federal Reserve Bank of Cleveland. He is primarily interested in macroeconomics and labor economics. His current work focuses on business cycles and labor markets, labor market policies, and search frictions.

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Meet the Author

Beth Mowry |

Research Assistant

Beth Mowry

Beth Mowry was formerly a research assistant in the Research Department of the Federal Reserve Bank of Cleveland. Her work focuses on labor markets and business cycles.

02.09.09

Economic Trends

The Employment Situation, January 2009

Murat Tasci and Beth Mowry

The labor market shed 598,000 jobs in January, coming in worse than expected and bringing this downturn’s total losses to 3.6 million. Downward revisions subtracted an additional 66,000 jobs from November and December’s figures, which now amount to losses of 597,000 and 577,000. Roughly half the losses in the current downturn have come in the past three months. Additionally, the unemployment rate jumped from 7.2 to 7.6 percent, the highest rate since September 1992.

Meanwhile, the diffusion index of employment change continued to hit new record lows since its creation in 1991. It sank from 25.5 to 25.3 last month, meaning that only 25.3 percent of industries are increasing their payrolls.

January’s payroll decline was the worst since 1974, with losses spread broadly across most industries. Goods-producing employment fell by 319,000, with the manufacturing sector accounting for two-thirds of those losses (207,000) and experiencing its largest monthly decline since October 1982. Durable goods bore the brunt of losses within manufacturing, owing largely to the subcategories of fabricated metal products (−37,000) and transportation equipment (−41,000). Construction had its second-worst month of the current downturn, shedding 111,000 jobs.

Losses in service-providing industries (279,000) were spread across all major sectors, with the lone exceptions of education and health (+54,000)—which has not contracted since September 2004—and the government, which made a small contribution of 6,000 jobs. The biggest losses were in trade, transportation, and utilities (−118,000) and professional and business services (−121,000). Within the trade, transportation, and utilities sector, truck transportation lost 25,000 jobs, its sharpest monthly drop since the trucking strike in April 1994 (when losses reached 49,000). Retail trade continued its poor performance, losing 45,000 jobs. A huge portion of the losses within professional and business services came from employment services (−89,000). The financial activities sector lost 42,000 jobs, its second-largest drop of the current downturn.

Labor Market Conditions
  Average monthly change (Thousands of employees, NAICS)
2006 2007 2008 January 2009
Payroll Employment
178
96
−248
−598
Goods-producing
5
−34
−123
−319
Construction
15
−16
−56
−111
Heavy and civil engineering
3
0
−6
−3
Residentiala
−5
−23
−34
−61
Nonresidentialb
16
6
−15
−46.9
Manufacturing
−14
−22
−71
−207
Durable goods
−4
−16
−52
−157
Nondurable goods
−10
−5
−19
−50
Service-providing
173
130
−125
−279
Retail trade
3
14
−44
45.1
Financial activitiesc
9
−10
−19
−42
PBSd
45
25
−61
−121
Temporary help services
2
−7
−44
−76.4
Education and health services
39
43
43
54
Leisure and hospitality
33
21
−20
−28
Government
17
24
14
6
Local educational services
6
8
2
2.8
  Average for period (percent)
Civilian unemployment rate
4.6
4.6
5.8
7.8
  1. Includes construction of residential buildings and residential specialty trade contractors.
  2. Includes construction of nonresidential buildings and nonresidential specialty trade contractors.
  3. Financial activities include the finance, insurance, and real estate sector and the rental and leasing sector.
  4. PBS is professional business services (professional, scientific, and technical services, management of companies and enterprises, administrative and support, and waste management and remediation services.
  5. Source: Bureau of Labor Statistics.

The three-month moving average of private sector employment growth dropped to an all-time low of −590,670 last month. The only losses in the private sector greater than that date way back to 1945.

In addition to the usual Employment Report information out today, the Bureau of Labor Statistics released its annual benchmark revisions to nonfarm employment, which affect data back to January 2004. These more comprehensive counts of employment are derived from unemployment-insurance tax records compiled by the Quarterly Census of Employment and Wages (QCEW) program. This year’s revision resulted in an additional loss of 385,000 jobs for the entire 2008 calendar year. About two-thirds of this loss was in services, most of which was due to additional losses in financial activities (79,000) and leisure and hospitality (71,000). Within goods-producing industries, manufacturing had the largest downward revision (66,000).

Unemployment continued to increase during January, following its upward trend in the past nine months. As of now, the unemployment rate stands 2.7 percentage points higher than a year ago, almost a 55 percent increase. This is the highest year-over year change since August 1975. This jump resulted from an increase in the number of unemployed workers (508,000) and the largest labor force contraction since May 1995 (731,000).