Jobs report less awful, media declares “recovery is for real.”
Back in September, Bob Murphy described the “recovery” like this:
Let’s say you are running and then break a leg. You have to crawl now, but you develop that skill and are able to get from here to there. Are you in recovery from the accident? According to the NBER, yes — so long as you are crawling faster than when you first hit the ground in agony.
Well, the job market has become somewhat adept at crawling through the mud, so today’s lackluster, but positive, jobs report has all the usual sources declaring that “the recovery is for real” and that the labor market is “making some serious progress.”
Perhaps. But allow me to put some things in perspective. First off, note that the press release put out by the BLS contains charts and graphs extending back only two years. Unfortunately, for us however, the national labor market peaked back in early 2008 after many months of stagnation in 2007. So any comparisons with 2009 and 2010 will simply show us that things are slightly less bad than they were at the bottom of the recession.
Colin Barr over at CNNMoney threw some cold water on the report by noting that economist David Rosenberg observed that “U.S. payrolls remain below their level of January 2000 — and 7 million south of their peak levels reached in the late stages of the housing bubble.”
According to the establishment survey, total employment in the US is still 7.2 million jobs below the Janaury 2008 peak. In the household survey, which the BLS uses to calculate the unemployment rate, total employment is down 6.3 million from the peak, while the total labor force is still 1.5 million workers smaller than it was it its peak. The graph below shows the household survey numbers:
As can be seen, the total labor force is much smaller than it would be under more normal conditions. The 1.5 million workers who have disappeared since the peak aren’t returning to find jobs, and this number doesn’t take into account the number of entry-level workers who have never entered the work force at all, but have opted to kill time in expensive debt-producing graduate school programs or live in their parents’ basements. A “normal,” but not red-hot, economy would likely add about 1 million to 1.5 million workers each year (with some years adding more than 2 million), but new workers aren’t showing up in the official data because young people and old people aren’t bothering to look for work right now. (See Jeffrey Tucker on the effects of youth unemployment.)
In a free economy, a declining work force might be a sign of good news, as workers are able to secure enough wealth to leave the workforce, or as incomes grow enough for double-income households to voluntarily become single-income households. But the declining work force in today’s economy is likely a sign of premature retirement and young people putting off the beginnings of their careers.
The media reports also quite happily reported a decline in the unemployment rate. But the unemployment rate provides very few insights, as I’ve noted here. Since the unemployment rate relies on calculations of both labor force size and on total employment, any understatement of the true number of people who should be counted as part of the labor force pushes the unemployment rate down. In March, the unemployment rate fell to 8.8 percent from March 2010′s rate of 9.7 percent, but the labor force shrank by almost half a million jobs during this period, so there would have been a drop in the unemployment rate even if job growth had been zero. (See Gallup’s own unemployment numbers.)
The U-6 Unemployment rate does attempt to include some of these missing workers, which brings the unemployment rate to 15.7 percent. A practical unemployment rate of 15.7 suggests, however, that there are an additional five million or more people (creating a total labor force of nearly 160 million) who are involuntarily part time or not actively looking for work.
So, even if we low-ball it, and add 5 million workers (who are underemployed or not actively looking for work) to the 6.3 million who are now officially unemployed, we ‘re looking at more than 11 million people who are either unemployed according to the strict definition, are lacking full time work, or are not looking for a job in such a manner as to be considered unemployed. At the present rate of job creation, which is hardly guaranteed for the rest of the year, it will be at least 2015 before we deal with the unemployed and underemployed workers we have now. But by then, of course, we’ll have a new batch of several million new workers to deal with.
This all assumes high employment growth of more than two million jobs each year for the next four years, and this is an unlikely scenario, to say the least.
The past ten years have not been kind in terms of either income growth or employment growth. As Barr also noted :”Slicing it up another way, over the past decade the United States has added 30 million residents, without making any accommodation for how they might earn their way in the world.”
The jobs of the bubble years have been all but swept away, and now perhaps 11 million Americans are now hurtling toward old age without any incomes to save or invest for the future, while years remain before the present job losses will be cured. The repercussions of the current depression will be felt decades into the future.
It’s amazing that this is apparently the best Keynesian monetary and fiscal policy have to offer, and yet we still must listen to the “mainstream” economists continue to lecture us on the need for more taxation, more regulation and more fiat currency. By the time 2020 rolls around, we’ll be staring at twenty years of near stagnation in jobs and income, and we’ll likely still be hearing the those economists singing the same tune.