Slow Job Creation, Not Job Losses, Driving Unemployment » The Foundry

Slow Job Creation, Not Job Losses, Driving Unemployment » The Foundry

Unemployment has risen above 10 percent and no one in Washington seems to understand what is going on. Yesterday, a little noticed release from the Bureau of Labor Statistics (BLS) shed important light onto the job situation.

The BLS’s Business Employment Dynamics (BED) program uses unemployment insurance (UI) records to track job private sector job gains and job losses. Because the data comes from administrative records it is highly accurate, but it also takes eight months to process. Yesterday the BLS finally released the data for the first quarter of this year.

By now we already know that unemployment has risen. Another government survey shows that between December 2008 and March 2009 the unemployment rate rose from 7.2 to 8.5 percent. The new BED figures, however, tell us why it went up. The main problem was not increased job losses: companies actually shed 53,000 fewer jobs than in the previous quarter. Unemployment is rising because private sector employers are creating far fewer new jobs than normal. New or expanding businesses created 992,000 fewer jobs than in the last quarter of 2008.

Federal Reserve Board Chairman Ben Bernanke says the economy needs to create at least 100,000 new jobs a month to keep pace with the growing labor force. Unemployment is rising because the private sector is not creating enough new jobs.