Friday, the BLS released the latest employment report. As I noted on my blog, this was a blow-out report. However, there were several points which raise concern, the most obvious being the increase in U-6 from 16.9% to 17.1. The measure includes the unemployed along with other classifications of people such as those “marginally attached” to the labor force and those employed part-time for economic reasons. However, as the data below demonstrates, long-term unemployment is largely a function of educational achievement and industry.
Consider the following charts, which show the unemployment rate and median usual weekly earnings for various groups based on educational achievement:
For high school drop-outs, the unemployment rate never reaches 5% — a statistical level economists argue is “full employment. Even during periods of economic expansion the rate of unemployment is high. Simply put, high school drop-outs face a difficult time even in good times. When bad times come, this demographic group experiences extreme difficulty.
Let’s take a look at weekly wages for high school drop-outs:
The unemployment rate for high school graduates does hit full employment, but only after the expansion is underway. They did fairly well during the 2001 recession, with unemployment rates barely above 5%. But they have been hit hard by the latest recession with unemployment rates of ~10%
The data’s results are very clear.
1.) Lower levels of educational achievement mean a higher rate of unemployment even in good economic times, and low earning potential.
2.) The higher the educational achievement, the less susceptible to economic events one becomes.
3.) Higher educational achievement means higher earnings.
Let’s look a bit deeper into the job loss data. Below are two charts — the first is total construction employment and the second is total manufacturing employment.
Both of these areas — which typically attract lower educational attainment employees — have been hit very hard in the latest recession. Construction has lost ~2 million employees and manufacturing has lost ~ 2.5 million. Neither of these areas is coming back soon. The US is very overbuilt and manufacturing is moving towards higher and higher rates of automation. This means the US has two choices: educate the unemployed so they can find better paying jobs or create jobs that these people can fill (or a combination of both).