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.

11.06.09

Economic Trends

The Employment Situation, October 2009

Beth Mowry and Murat Tasci

Nonfarm payrolls fell by 190,000 in October, coming in slightly below expectations. Previous estimates for August and September, however, were revised up strongly by a total of 91,000, reducing those months’ respective losses to 154,000 and 219,000. The economy has shed a net total of 7.3 million jobs since December 2007, but losses have gradually slowed in recent months, with the average decline falling from 428,000 in the second quarter to 225,000 in the third quarter.

The more surprising aspect of the Bureau of Labor Statistics’ employment report was the large jump in the unemployment rate, from 9.8 to 10.2 percent, a 26-year high. The increase resulted from a rise in the number of unemployed persons ( 558,000), as the size of the labor force stayed relatively constant. A less volatile measure of employment trends in the labor market is the employment-to-population ratio, which slipped 0.3 percentage point to 58.5 percent, its lowest since October 1983.

Industries contributing most to October’s slowdown in payroll losses included professional and business services and education and health, which experienced larger gains over the month, and government, which had no net change after a 40,000 loss in September.

Goods-producing industries on the whole shed 129,000 jobs, split evenly between construction and manufacturing. Construction dropped 62,000 jobs last month, with losses continuing to be at least twice as great on the nonresidential side compared to residential. Manufacturing employment worsened for both durables and nondurables, falling by a total of 61,000 jobs. Motor vehicle and parts manufacturers, however, actually did not contribute to the decline for a change, adding 4,600 payrolls after losing an average of 14,000 per month over the course of the recession.

Service-providing industries lost a total of 61,000 jobs, with most areas seeing little change to moderate improvement. The exception was leisure and hospitality, with losses ballooning to 37,000 compared to just 2,000 in September. Performance was roughly unchanged in October for trade, transportation, and utilities (−66,000), information (−1,000), and financial activities (−8,000). Retail trade’s loss of 39,800 was a tiny improvement, staying roughly on par with the average change since April. Professional and business services added 18,000 jobs compared to 3,000 in September, with progress particularly evident in temporary help services, which had its largest of three consecutive increases (33,700). The only industry without a single decline over the recession has been education and health services, and its gains rose from 17,000 to 45,000. The government sector neither added nor subtracted jobs on net last month but contributed heavily (+44,000) to the total upward revisions in August and September mentioned previously.

Labor Market Conditions and Revisions

 
Average monthly change (Thousands of employees, NAICS)

August
current

Revision to August

September
current

Revision to September

October
2009
Payroll Employment
−154
47
−219
44
−190
Goods-producing
−130
2
−114
2
−129
Construction
−66
−6
−68
−4
−62
Heavy and civil engineering
−5.2
1
−12
0
−14
Residentiala
−19.7
0
−13
0
−15
Nonresidentialb
−41.5
−7
−42
−3
−33
Manufacturing
−55
11
−45
6
−61
Durable goods
−44
11
−39
4
−44
Nondurable goods
−11
0
−6
2
−17
Service-providing
−24
45
−105
42
−61
Retail trade
−21
−12
−44
−6
−40
Financial activitiesc
−23
2
−9
1
−8
PBSd
−6
13
3
11
18
Temporary help services
3
10
7
9
34
Education and health services
50
4
17
14
45
Leisure and hospitality
−14
0
−2
7
−37
Government
12
31
−40
13
0
Local educational services
−8
9
−14
−1
5
  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 diffusion index of employment change tumbled in October, from 37.5 to 33.8, taking a bite out of progress made in each of the three months prior. The index has climbed up from a record low of 19.6 in March but remains far below the expansionary threshold of 50, which indicates an equal balance between industries expanding and contracting employment.