Global View: The tale told by jobs

"It was the best of times, it was the worst of times," writes Charles Dickens at the beginning of "A Tale Of Two Cities." There is an element of this in the tale of employment and unemployment in the United States.

In unemployment, as in much else, it is the "headline number" that wins attention. The headline number, the unemployment rate, rose to 6 percent of the workforce in April, the U.S. Bureau of Labor Statistics reported Friday, a bit worse than the 5.8 percent figure in March.

A bad number? From 1975 to 1987 the annual average unemployment rate in the United States exceeded 6 percent every year except in 1979 (when it was slightly lower, at 5.8 percent.)

The worst post-Second World War unemployment in the United States was much higher than today's rate: 10.8 percent of the workforce at the end of 1982. Unemployment was very low in the United States in the 1940s and 1950s and for much of the 1960s but, since 1970, sustained annual rates of sub-6 percent unemployment have only been recorded once -- in the most recent period, running from 1995 until now, when unemployment is just, in recent months, bumping up against the 6 percent threshold.

Are things bad, then, or good? In a sense, the workers of the world's biggest economy have rarely had it so good. In the past seven years, unemployment has consistently been at some of its lowest levels since 1970. Today's unemployment rate is still, by the standards of the past 30 years, an unusually low one.

Good times then? As often with statistics there is another way of looking at things. The number of Americans registered as unemployed now amounts to 8,786,000. That is a lot of workers and a level approaching some of the worst ever recorded in the United States.

When unemployment was at its post-Second World War worst, for example, in 1982 and 1983, the average number of workers unemployed in each of those two years was 10,678,000 and 10,717,000, respectively, about 1.9 million workers more than today and about a fifth higher than the current total of unemployed workers. It is a surprisingly small gap from the worst post-war unemployment recorded in the United States.

How is this, if the unemployment rate is not particularly high? The reason is that the population has grown, making the pool of workers bigger, and the participation rate of the population in the world of work has grown as more women have gone to work.

The pain is real. More than 3 million workers who had jobs when the U.S. was still booming in 2000 don't have them. As usual, young people and minority groups are worst affected. The unemployment rate for teenagers is now 18.0 percent; that for blacks or African Americans has risen to 10.9 percent of the workforce; that for Hispanics or Latinos 7.5 percent.

Meanwhile the workers who are working are working less. The average work week fell to 34.0 hours in April from 34.3 in March, taking the number below the annual average for any year since data began to be collected in 1964.

What all this points to is decreasing demand for labor. Why should that be? The labor statistics themselves point to some of the answers.

The Bureau of Labor Statistics' chart for the population's participation in the workforce is revealing. It shows that from rates of around 58 percent of the population in the 1960s, the participation rate to a peak of 67.4 percent in April 2001 -- shortly after the 1990s economic boom had crested.

In part, this is a secular trend, as we stated above, reflecting the growing role of women in the work place. But the high peak in Americans' participation in the workforce coincides with other extremes: the extremely low unemployment rates recorded in recent years, the 3.9 percent of the workforce at the end of 2000 being the lowest rate for 30 years.

What does this tell us? The important thing to grasp is that the second half of the 1990s was an exceptional period in which employment, earnings, bonuses, stock market earnings, economic growth and, in sum, America's prosperity, was greater than it had ever previously been. It was the best of times.

It was also the worst of times. The boom in the economy did a great deal of good, above all in providing more work and higher earnings than ever before for America's workers and strong demand for goods from all around the world. The United States was the world's economic engine.

But the boom also created false expectations, euphoria, a tendency to spend not save that must now be reversed. It led to huge misinvestments of capital in companies that have since failed or will fail. And, at worst, it encouraged an almost systematic, usually legal theft of money from companies as Wall Street and corporate executives cashed in on stock options, commissions and bonuses.

Where did that money come from? Where has it gone? The stock bubble produced it. Those who cashed in at the right time have run off with the cash. Those who depend on stock investments for retirement plans have been left carrying the can.

An extraordinary fact: in the past two years, as unemployment has risen, the number of employed workers of the ages 45 to 54 has risen by 0.9 million and the number of those over 55 years old by 2.5 million. The reason may be that older workers are having to work more to compensate for falls in the value of their retirement plans.

The process of slowdown is not over. The stock market, the labor market and the economy as a whole face further falls as the U.S. economy heads down from the false boom time. That is the tale the job numbers tell.

Global View is a weekly column in which our economics correspondent reflects on issues of importance for the global economy. Comments to icampbell@upi.com.