Pimco’s Tony Crescenzi: Structural Changes in the Economy Will Lead to Long-Term Job Losses

The Washington Post noted last month that job losses might be caused by structural changes that are lowering the number of jobs in America on a long-term basis:

Another disturbing development was that the number of people out of work for 27 weeks or longer reached a record 5 million, accounting for a third of the unemployed. That suggests to some economists that those job losses were caused by structural changes in the economy and that many of those people won’t be called back to work once the economy picks up. The longer people are out of work, the harder it becomes for them to find jobs and the more likely they are to exhaust savings or lose their homes to foreclosure.

Now, Pimco portfolio manager Tony Crescenzi is saying the same thing:

Structural rather than cyclical influences on unemployment are running well above normal during the current recession, as is highlighted by the percentage of the unemployed that are “not on temporary layoff.”

Data from the Bureau of Labor Statistics show that 53.9% of the unemployed were not on temporary layoff in August, up from 39.1% a year earlier and well above the 30-year average of about 34%. The current level is well above the peak of previous cycles, which tended to move above 40% and was as high as 44.9% in May 1992. Many job losses are occurring in industries with broken business models and jobs won’t return quickly. This will put downward pressure on wages …

In terms of numbers of people, data from the BLS show that 8.1 million people were characterized as “not on temporary layoff” in August, up from 7.880 million in July and 3.72 million a year earlier. The not-seasonally-adjusted figure for “Permanent” job losers totaled 6.406 million, up from 3.609 million. These figures represent a very large proportion of the roughly 7 million decline in nonfarm payrolls (the tally on payrolls is produced via a survey of business; the figures on unemployment and both the “not on temporary layoff” and “permanent” job losers categories are derived from the survey of households).

See this for background.

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