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Recession 2013: This Report Shows We're Already Headed There

Recent reports have indicated a downturn in the U.S. economy. Coupled with fears stemming from the Eurozone debt crisis, they've fueled speculation about "Recession 2013."

In fact, former President Bill Clinton said he thinks we are already in a recession – and that was before the latest U.S. unemployment numbers were released, painting an even gloomier picture.

By now most of you have heard about the awful numbers in the discouraging U.S. jobs report for May, where only 69,000 jobs were added – nowhere near the 150,000 expected.

But what's worse about the U.S. jobs report is the trend of long-term unemployment.

Even though the national unemployment rate has dropped from its October 2009 high of 10.1% to its current level of 8.2%, the long-term unemployment levels have not seen a similar drop.

Without improvement in these numbers, fears regarding another recession will become reality.

How U.S. Jobs Trend Will Spell "Recession 2013"

Long-term unemployment, measured every six months, reached a peak of 46% of the unemployed population during May 2010.

That number has only fallen to 42.8%, or 5.4 million of the total unemployed, and has risen of late.

Looking at the chart it is easy to see that long-term unemployment is at its highest level in the past thirty years. Going back further, it is actually at its highest level since the Great Depression.

Who are the Long-Term Unemployed?

The Department of Labor last week released the amount of initial claims for unemployment filed during the week of June 2.

(Figure 1 Source: Bureau of Labor Statistics)

About 370,000 new claims were filed, a painfully high amount. The following industries filed the most recent claims, and are where most of the long-term unemployed are hunting for work:

  • Construction — Responsible for 13.6% of all unemployment claims filed. Over the past 12 months new home sales have been at lows not seen in the past 50 years. The National Association of Home Builders says housing starts are about a third of where they should be in a healthy housing market.
  • Administration and Support — 12.2% of all unemployment claims filed. The decline in jobs started in 2009 as administrative assistants started to work for multiple executives and even whole departments. This category includes the employment services industry, temp agencies and similar job-finding companies.
  • Manufacturing — 9.7% of all unemployment claims filed. This industry has been hurt by cyclical events in transportation equipment and high turnover in the food sector. There are some positives as Ford Motor Co. (NYSE: F) and General Motors Co. (NYSE: GM) have increased production, and manufacturing claims are down 31% from a year earlier.
  • Retail Trade — 8.6% of all unemployment claims filed. Retail workers have been impacted by store closings, the cyclical nature of retail, and the fact that more part-time workers have been hired to cut costs.
  • Healthcare and Social Assistance — 8.2% of all unemployment claims filed. Many people assume that healthcare is recession-proof and that the aging baby boomer phenomenon should eventually lead to more jobs. While doctors and nurses have not been hit hard, entry-level positions such as nurse's assistants and home health aides have a high turnover. Hospital consolidations or mergers have left many HR, administrative and other hospital workers out of work as staffs combine and eliminate redundant positions.

Long-Term Unemployment a Huge Concern

Long-term unemployment is a serious condition with permanent scarring effects on the unemployed workers. Physically, mentally, and economically it will be hard for these workers and their families to recover.

Some of these workers may never return to the workforce, further escalating the problem.

"The result is nothing short of a national emergency," economists Dean Baker and Kevin Hassett wrote recently in The New York Times. "Millions of workers have been disconnected from the work force, and possibly even from society. If they are not reconnected, the costs to them and to society will be grim."

Some economists have argued that the unemployment numbers are cyclical; others have argued the problem is structural. If it is structural – meaning there's a disconnect between the jobs being offered and the skill level of job hunters – then U.S. unemployment will not fall much more, even with strong economic growth.

More importantly, if economists still cannot agree on the causes for the historically high unemployment rates, it will be even harder for them to pinpoint any solutions. Lack of a resolution will make "Recession 2013" a reality.

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