Quarterly Industry Update: Spring 2003
What’s Happened to Jobs, Wages, Hours, and Unemployment Since the Recession Began

This industry update shows how workers in the nation as a whole and in nine major industries have fared, month by month, from March 2001, when the recent recession began, until March 2003. The update is based on data provided by the Bureau of Labor Statistics (BLS).¹ All data are seasonally adjusted except for industry unemployment rates, which are not available on a seasonally adjusted basis.²

The nation’s weak economic recovery is a jobless one. A brief job upswing in the summer of 2002 was short-lived, and the economy has stalled since last fall. Workers in all major industries except government and finance/insurance/real estate are still experiencing some ongoing effects of the recession that began in March 2001. Manufacturing workers have been especially hard-hit.

The National Picture

Employment and unemployment data point to continued economic weakness for workers and job-seekers. A double-dip recession is a distinct possibility. In March, working people saw no change in an already high unemployment rate and a drop in employment to its lowest level since the end of 1999. Recent wage changes do not provide any clue to the future direction of the economy; wages rose slightly in March after rising substantially in February and hardly rising at all in January.

The unemployment rate rose from 4.3 percent in March 2001 to 5.8 percent in December 2001. It has remained between 5.6 percent and 6 percent in every month since then, with no upward or downward trend (chart 1-1). In March 2003, it was 5.8 percent, the same as in February. Most major economic forecasters expect the unemployment rate to remain above 5 percent through the end of 2004. (See WAI’s Economic Update for details.)

The total number of jobs fell continuously from the beginning of the recession until April 2002. The nation lost more than 1.9 million jobs (or 1.4 percent of all jobs) during that period. Employment has remained between about 130.4 million and 130.9 million jobs since then (chart 1-2). A small job recovery in summer 2002 was wiped out in the fall. Employment in March 2003 was 108,000 jobs lower than in February 2003 and was the lowest it has been since the end of 1999. March’s 108,000-job loss followed a loss of 357,000 jobs in February.

Average weekly work hours of production and nonsupervisory workers are often considered a “leading indicator” of both recessions and recoveries because employers typically increase work hours before they hire new workers in an economic recovery and cut work hours before they lay off workers in a recession. Work hours fell by 0.2 hours between August and October 2001, reaching a low point of 34 hours in October 2001. Since then, hours trended slightly upward through June 2002, fell in July, then recovered again, reaching 34.2 in September through November. Since December 2002, the average workweek has ranged between 34.1 and 34.3 hours, with no trend (chart 1-3). The March 2003 average workweek of 34.3 hours was up 0.1 hours from March 2001.

Monthly wage growth reached a 5.2 percent annualized rate in June 2001 and a 5.1 percent annualized rate in September 2001 and then trended downward through April 2002, when it was 1.7 percent (chart 1-4). (The annualized rate of monthly wage growth is the percent change in average hourly wages from one month to the next, expressed on an annual basis. It shows how fast hourly wages would grow per year if one month’s worth of wage growth were to continue unchanged for an entire year. We report annualized rates of monthly wage growth instead of simple monthly growth rates because most people are used to thinking about raises in annual percentage terms and because inflation rates are usually reported in annual percentage terms.)

There has been no clear trend in wage growth during recent months. From May-August 2002, wage growth trended upward, reaching 5.8 percent in August, then trended downward. In January 2003, wages actually fell for the first time since February 1988. Wages then rose at a 7.4 percent annualized rate in February 2003 and at a much more modest 1.6 percent rate in March.

Overall, wages were 6.6 percent higher in March 2003 than in March 2001. Because consumer prices rose by about 4.2 percent from February 2001 through February 2003, wage growth has been slow since the recession began. Inflation-adjusted wage growth last year never came close to reflecting last year’s nonfarm business productivity growth rate of 4.8 percent per year. Workers have so far received little benefit from this productivity gain. Because wage growth has remained below productivity growth, wages have not been a source of upward pressure on the prices of goods and services.

Mining

Our economic indicators, taken together, suggest that workers in the mining industry are worse off now than at the beginning of the recession. However, considerable month-to-month variation in the indicators makes assessment of the trend difficult.

The industry’s unemployment in March 2003 was 8.2 percent, 2.9 percentage points higher than in March 2002 (chart 2-1). The number of mining jobs generally grew during the recession until September 2001, trended downward through December 2002, and has changed little since then (chart 2-2). Mining employment in March 2003 was 1000 jobs higher than in the previous month and 1.3 percent (or 7000 jobs) below its level at the start of the recession in March 2001.

Average weekly work hours generally trended downward since the beginning of the recession, although with a great deal of month-to-month fluctuation (chart 2-3). In March 2003, the average workweek was 42.8 hours, up from 42.7 hours the previous month and down from 43.7 hours in March 2001.

After falling in December, hourly wages rose at a 9.1 percent annualized rate in January 2003, a 19.7 percent annualized rate in February, and a 13.3 percent annualized rate in March (chart 2-4). In March 2003, they were 5 percent above their March 2001 level. After taking inflation into account, this represents very slow wage growth.

Construction

Construction workers have not yet recovered from the recession that began in March 2001. Unemployment in construction was 11.8 percent in March 2003, the same as in March 2002 (chart 3-1). The number of construction jobs has trended downward since the beginning of the recession. However, there has been a good deal of month-to-month fluctuation in construction employment (chart 3-2). Construction employment in March 2003 was 21,000 jobs above its level the previous month but 238,000 jobs (or 3.5 percent) below its level in March 2001.

Average weekly work hours trended downward from the start of the recession through November 2002. They rose through January 2003, fell in February to their lowest level since the recession began, and then recovered in March (chart 3-3). In March 2003, the average workweek of 39.1 hours was 1.7 hours above its level the previous month and 0.3 hours below its level at the start of the recession.

After falling substantially in January and rising substantially in February, construction workers’ average hourly wages did not change in March (chart 3-4). The industry’s average hourly wage was 4.8 percent higher in March 2003 than in March 2001. Taking inflation into account, this represents very slow wage growth.

Manufacturing

In terms of job losses, manufacturing was hit harder by the recession, and continues to suffer more from its ongoing effects, than any other major industry. Manufacturing has been losing jobs every month beginning in August 2000. Chart 4-2 shows how this trend has continued since the beginning of the recession. Manufacturing employment in March 2003 was 9.7 percent (more than 1.7 million jobs) below its March 2001 level. About 85 percent of all jobs lost since the beginning of the recession were manufacturing jobs. Manufacturing lost 36,000 jobs in March 2003. In terms of job losses, the recession was largely a “manufacturing recession.” The March 2003 manufacturing unemployment rate was 6.8 percent, down from 7.3 percent in March 2002 (chart 4-1).

Average weekly work hours trended downward from the beginning of the recession through November 2001, then trended upward through June 2002, then generally trended downward through November 2002, rose in December, and fell slightly in February 2003 (chart 4-3). In March 2003, the average workweek was 40.8 hours, the same as in the previous month and down 0.1 hours from March 2001.

Hourly wage growth has, on average, been slow since the beginning of the recession. Average hourly wages were 6.5 percent higher in March 2003 than in March 2001. Month-to-month wage growth was much more variable from March-November 2002 than it was before or after that (chart 4-4). Despite rapid (4.5 percent) productivity growth in manufacturing last year, rapid wage growth in manufacturing seems unlikely in the near future. Wage growth has been slow during the last four months (ranging between a 3.1 percent and a 3.9 percent annualized rate each month).

Transportation and Public Utilities

This sector continues to suffer from the ongoing effects of the recession as well as from recent weakness in telecommunications. The sector’s unemployment rate was 5.9 percent in March 2003, up from 5.6 percent in March 2002 (chart 5-1). In terms of both absolute and percentage job losses, transportation has suffered more from the recession and its ongoing effects than any other major industry except manufacturing. Jobs in transportation and public utilities have declined all but two months since the beginning of the recession (chart 5-2). In March 2003, there were 7.1 percent fewer jobs (amounting to 508,000 fewer jobs) in this sector than there were in March 2001.

Average weekly work hours have trended upward from the fall of 2001 through November 2002, then fell in December, did not change through February 2003, and rose in March 2003 (chart 5-3). The average workweek in March 2003 was 38.6 hours, up from 38 hours in March 2001.

Hourly wage growth has, on average, been slow since the beginning of the recession. Average hourly wages were 6.4 percent higher in March 2003 than in March 2001. Recent wage growth has not followed any clear trend (chart 5-4). A March 2003 wage increase of 2.1 percent (annualized) followed a February increase of more than 10 percent (annualized), which came on the heels of two straight months of wage declines.

Wholesale Trade

Our economic indicators point to continuing weakness in the job market in this sector. In March 2003, the unemployment rate in wholesale and retail trade combined³ was 5.9 percent, down from 6.6 percent in March 2002 (chart 6-1). Employment in wholesale trade has trended downward since the beginning of the recession but seems to have stabilized over the last four months (chart 6-2). The number of jobs in this sector was the same in March 2003 as in February, and the March 2003 employment level was 2.6 percent (or 180,000 jobs) below the level of March 2001.

Average weekly work hours changed relatively little from the beginning of the recession through May 2002, and then moved upward slightly (chart 6-3). The average workweek in March 2003 was 38.4 hours, the same as in the previous month and up from 38.2 in March 2001.

Hourly wage growth since the beginning of the recession has been very slow. Average hourly wages were 4.8 percent higher in March 2003 than in March 2001. On a month-by-month basis, though, wage growth was extremely variable (chart 6-4). Wages fell at a 2.2 percent annualized rate in March 2003 after rising at a 10.8 percent annualized rate the previous month.

Retail Trade

Most of our economic indicators suggest continuing weakness in this sector. Retail trade continues to suffer from high unemployment. (See discussion of wholesale trade above.)

The number of jobs in retail trade generally rose from the beginning of the recession through June 2001, and generally trended downward since then (chart 7-1). Retail trade lost 43,000 jobs in March 2003. Employment in this sector in March 2003 was 1.9 percent (or 448,000 jobs) lower than at the beginning of the recession.

Average weekly work hours were generally slightly higher in 2002 and 2003 than in the latter part of 2001 (chart 7-2). The average workweek in March 2003 was 29.2 hours, up 0.1 hours from the previous month and up 0.4 hours from March 2001.

Average hourly wages were 5.1 percent higher in March 2003 than in March 2001. Taking inflation into account, this represented very slow wage growth. Month-to-month wage growth has been extremely variable since the beginning of the recession (chart 7-3). Wages fell in March at a 1.2 percent annualized rate after rising at an 8.6 percent annualized rate in February.

Finance, Insurance, and Real Estate

The recession had relatively little effect on finance, insurance, and real estate. Unemployment in this industry is lower than in any other major private sector industry except for education and health services. The March 2003 unemployment rate for financial activities⁴ was 4 percent, up from 3.2 percent in March 2002 (chart 8-1).

Employment in this sector has generally trended upward since the beginning of the recession, with especially large increases in September and October 2002 (chart 8-2). In March 2003, there were 12,000 more jobs than in February and 153,000 more jobs (2.0 percent more jobs) than at the start of the recession.

There was relatively little change in average weekly work hours since the start of the recession, although hours increased during each of the last three months (chart 8-3). The average workweek in March 2003 was 36.6 hours, up 0.2 hours from February and up 0.3 hours from March 2001.

Hourly wage growth has been slow since the beginning of the recession. Average hourly wages were 7.3 percent higher in March 2003 than in March 2001. There was considerable month-to-month variation in the rate of wage growth. Wages have risen at an annualized rate of less than 3 percent during each of the last four months (chart 8-4).

Services

Workers in some parts of this large and varied sector continue to suffer from high unemployment, but in other respects the recession seems to have had no substantial impact on services. Unemployment rates in the different service subsectors vary considerably (chart 9-1). The unemployment rates in professional and business services and leisure/hospitality are extremely high, and they rose since last March. In education and health services, unemployment is less than 4 percent and fell slightly since last March. Unemployment in other services is more than 5 percent and rose over the year.

The recession affected service sector employment only briefly. Employment rose slightly from the beginning of the recession through September 2001, fell sharply in October and November, and grew slowly since then, surpassing its level at the beginning of the recession. However, employment fell during each of the last two months (chart 9-2). In March 2003, service sector employment was up by 0.9 percent (or 376,000 jobs) over its March 2001 level but down by 10,000 jobs over its January 2003 level.

The recession does not seem to have affected average weekly work hours, which ranged from 32.5 to 32.8 hours in every month since the beginning of the recession and which showed no trend during that time (chart 9-3).

After rising at an annualized rate of 11.4 percent in February 2003, average hourly wages increased at an annualized rate of 0.8 percent in March. Hourly wage growth has been higher than in any other major industry since the beginning of the recession, but on average it has been moderate after taking inflation into account. Average hourly wages were 8.4 percent higher in March 2003 than in March 2001. Wage growth during the second half of 2002 was generally more rapid than during the first half but slower than in 2001 (chart 9-4).

Government

The recession had relatively little effect on government workers. Unemployment remains lower for government workers than for those in any major private sector industry. Unemployment in this sector was 2.6 percent in March 2003, up from 2.4 percent in March 2002 (chart 10-1).

Government employment trended upward since the beginning of the recession, falling slightly only in April and December 2002 and more substantially in March 2003 (chart 10-2). Government employment was higher by 2.6 percent (or 547,000 jobs) in March 2003 than in March 2001. About 40,000 government jobs were lost in March 2003.

Recent data on wages and work hours in the public sector are not available.

This update was prepared by Howard Wial, Research Director of the AFL-CIO Working for America Institute.

¹ All BLS data used to prepare this update can be obtained at www.bls.gov. Unemployment data come from the Current Population Survey. All other labor market data come from the Current Employment Statistics program. Average weekly work hours and average hourly wages are for production and nonsupervisory workers only. WAI calculated annualized wage growth using BLS Current Employment Statistics average hourly wage data. The wage growth statistics in this update are not adjusted for inflation.

² The Current Population Survey, which is the source of the industry unemployment data, changed its industrial classification system in January 2003. The new system is not completely consistent with the old one, so the seasonal adjustments formerly used are no longer valid. Therefore, seasonally adjusted industry unemployment rates are no longer available.

³ BLS does not report separate unemployment rates for wholesale trade and retail trade. Because retail trade is so much larger than wholesale trade, the combined unemployment rate for the two industries primarily reflects the experience of retail trade workers.

⁴ “Financial activities” is the major industry category under the new industry classification system that corresponds closely, but not exactly, with the old “finance, insurance, and real estate” category. BLS unemployment data use the new industry category while BLS data on employment, wages, and hours still use the old category.