Doug Anderson, EVP, Research & Development, The Nielsen Company
SUMMARY: Unemployment is rising in the U.S., hitting sectors of the population typically immune. Growth rates are highest among men, consumers in the upper age ranges, those with college degrees and non-Hispanic whites. Precise targeting of both message and in-store conditions will be necessary for marketers seeking to minimize losses.
Between the third and fourth quarters of 2008, the U.S. added 1.25 million workers to the unemployment roster, an average of 417,000 per month. Thats roughly the equivalent of taking jobs from the entire labor force of a market like Albuquerque or Tulsa each month. Overall, the U.S. gained slightly over 3.0 million unemployed workers in all of 2008, and that is the same as taking the jobs from all the workers in the entire state of Missouri. January of 2009 saw a further loss of 626k jobs, a bit more than the entire civilian labor force of Louisville, KY. And that is right in line with public perceptions. A December poll from the Pew Research Center found that nearly two-thirds of Americans believed that unemployment would continue to rise in 2009.
Data released by the U.S. government on February 5, 2009, showed new unemployment claims at more than a 26-year high. The share of the labor force receiving unemployment benefits has not been higher since the third quarter of 1982, when the country was mired in a steep recession. However, that rate does not include nearly two million unemployed workers who are receiving extended benefits under a program extension authorized by Congress in 2008.
Workers who had thought themselves immune began to see their own jobs start to disappear...
The changing face of unemployment
As 2008 wore on and the unemployment rate continued to rise, the demographic face of those losing jobs began to shift. Workers who had perhaps thought themselves immune to shifting economic fortunes began to see their own jobs start to disappear. The result is an unemployment profile more far reaching than the U.S. has seen in quite some time. For marketers, the result is that the core markets for a much wider spectrum of products is now being hit by unemployment. Heading into 2009, its no longer just the more downscale sectors of the population who are being strongly hit by the economic downturn, but increasingly, those near the top end as well.
Male unemployment growing faster than for women
The unemployment rate for men was higher than that for women all last year, but the gap increased throughout the year as seen in the table below. From Q1 to Q4 of 2008, the gap between men and women has increased by over 360% (from a gap of 5.1% to 4.8% in Q1 to a gap of 7.4% to 6.1% in Q4). Both married men living with a spouse and other men living without a spouse have seen their unemployment rates grow at a faster rate than for women. Highest unemployment is for single or separated men, with a current rate of 12%.
Unemployment is highest in the upper age ranges
Unemployment rates vary substantially by age, with teenagers in the labor force being over four times more likely to be unemployed than persons over the age of 55. The unemployment rate declines as age increases as seen in the table below. (Note: The data below are for men only. Data for women 55+ have not been released for 2008 by the Bureau of Labor Statistics at the time of this printing.) However, the highest growth in unemployment has been in the upper age ranges. The unemployment rate for men aged 45–54 increased by nearly 24% from Q3 to Q4, nearly twice the rate of increase seen between Q1 and Q2. Men over the age of 55 also saw a rapidly growing unemployment rate. Men in these age ranges are in their peak earning years and often still have families with children at home or perhaps in college. If unemployment continues to increase in these age ranges, we may see much more of an impact in the upper middle classes than was seen previously.
Unemployment is growing fastest among the college educated
The highest rates of unemployment are for those with less than a high school education, pushing above 10% for almost the entire second half of 2008. In Q4 of 2008, rates were at above 10% for the most poorly educated, at 7% for those with a high school diploma, at 5.4% for those with some college, and at 3.3% for those with a college degree. However, as with age and gender, the fastest growth in unemployment is happening among those with a college degree. As seen in the table below, as unemployment rose by 16% between Q3 and Q4 overall, it rose by nearly 28% among college graduates. This further suggests that unemployment is starting to reach into new sectors of the population. As college graduates start to see workers like them losing their jobs, they will also become more cautious about spending.
Non-Hispanic whites have the highest unemployment growth rate of all ethnic groups
Blacks have the highest rates of unemployment in the U.S., at nearly 12% in Q4 of 2008, a level nearly twice that of non-Hispanic whites. Hispanics also have higher unemployment rates than non-Hispanic whites, but their rate is still well below blacks. Non-Hispanic whites are lowest, but as seen in the table below, have the highest growth rate for unemployment of all groups, growing +44% between Q3 and Q4.
Substantial market-by-market variation
The landscape of unemployment in the U.S. also varies significantly. The top unemployment states are geographically dispersed, with Michigan and its failing automobile industry head and shoulders above the rest—over 9% unemployment in November of 2008. The lower unemployment states—some with a rate less than one-third of Michigans—tend toward the Great Plains and the Western United States.
Within states there is also substantial variation market by market. A handful of markets—including Elkhart, IN; Coeur dAlene, ID; Danville, VA; Boise City, ID; Dalton, GA; and Idaho Falls, ID—have seen local unemployment rates increase by over 100% between November of 2007 and November of 2008. Other markets—accounting nearly one-third of the U.S. labor force—have seen unemployment increase by between 50% and 100% over the same period.
These data clearly suggest that while unemployment is on the rise almost everywhere, the extent of the increase varies substantially by local areas. Consequently, some retailers will be impacted far more than others, and some stores far more than other stores. Now, perhaps more than at any time in the past 30 years, marketers must be cognizant of the need to evaluate their pricing strategies on a local basis, tracking the movement of shoppers from retailer to retailer, from channel to channel, and possibly from branded to private label as economic conditions worsen.
The high price of unemployment
The unemployment rate rose by 13% between the third and fourth quarters of 2008, but this news, along with non-stop media coverage of the worsening economic conditions engendered must larger changes in how people thought about spending their money. Data from the Pew Research Center released in December 2008 show much larger increases in consumer caution. The table below highlights some of the cutbacks consumers are making.
As with the unemployment data, the Pew surveys also highlight the changing face of joblessness in the United States. In February of last year, 28% of people surveyed said that a member of their household was out of work and looking for a new job at some point in the last year. By December, that figure had increased by 25–35% of persons. However, the changes were not flat across demographics, as seen in the table below. By December 2008, 28% of upper middle income households had an unemployed member, an increase since February 2008 of nearly 65%. During the same time, there was no increase for households earning less than $30k. College graduates also took a big hit, with a 56% increase, as did persons in the 50–64 age range.
For Americans, rising prices and the job situation are the most pressing concerns, but the relative importance of these two factors shifted in the fourth quarter of 2008 as more and more companies announced layoffs. Prices are still the top worry for 31% of Americans, but that is an 18% decline since October, when 38% found prices to be their top concern. During the same period, those who said that unemployment was their top economic worry rose by 44%, from 18% to 26%. Worries about jobs rose across the board by income, but concerns among the upper middle classes were especially strong, with those saying that unemployment was their top concern increasing by 80–90%, versus 11% for those who earn less than $30k per year.
Despite all this bad news, most Americans remain quite optimistic about the future. The percentage who feel that Americans can always find ways to solve their problems is higher today than it was in 2004, up 15% according to the Pew survey from 59% to 68%. The share of respondents who feel that the country will not be able to solve its many important problems fell between December of 2004 and December of 2008, from 36% to 27%—a 25% drop.
Unemployment is reaching well into the middle and upper middle classes...
Marketers selling consumer products in the U.S. will need to integrate all these points of view into their marketing efforts. Many households already have a member without a job and looking for work, and the specter of losing a job is impacting many more. The kinds of households either already impacted by unemployment or very concerned about the job situation have changed. Downscale households with less economic security have already been hit hard, and things will continue to be difficult for them for some time. However, those who perhaps once thought themselves safe from smaller economic downturns are starting to be impacted as well. Unemployment is not only for the poor anymore, but is reaching well into the middle and upper middle classes, impacting more and more older and better educated workers.
Rising levels of unemployment are not uniform across the country. Some regions and local markets have been hit much worse than others. Precise targeting of both message and in-store conditions will be necessary for marketers seeking to minimize losses in harder hit areas while trying to maintain revenues in better off communities.
Current Population Survey 2008 – Bureau of Labor Statistics
Pew Research Center – Psychology of Bad Times Fueling Consumer Cutbacks (released December 11, 2008)