Jobs report: Surprising strength, consistent with a slowdown
There’s no reason to shop around the Web for a mixture of unemployment optimism and pessimism when you can get both in the very same report. Reuters is our full-service provider for both dark clouds and silver linings today.
The headline of the Reuters piece on April’s unemployment numbers is “Job market shows surprising strength.” But later we learn “some details of the report remained consistent with a slowdown in economic activity.”
It’s a mixed write-up fitting for a jigsaw puzzle of conflicting jobs data. The best way to summarize it might be to say that the jobs market is stagnant, but many analysts thought it would be a lot worse. As senior economist Russell Price of Ameriprise Financial Services told Reuters, “The idea that the employment is holding as well as it is in the face of the fiscal headwinds the economy is currently enduring is a very positive sign of the economy’s underlying fundamental improvements.”
No one could seriously characterize this as a “recovery,” but it’s a hopeful sign that the downward spiral has been arrested. March’s numbers were horrible – the April report revises them upward by 50,000 jobs, while the much better February report picked up another 64,000 – so analysts set a low bar for April, and April beat their expectations. A robust “recovery” would give us several months of steady improvement, not a good February followed by jobs below population growth in March, and April treading water.
One good sign is that April was a rare month when the official unemployment rate when down – from 7.6 percent to 7.5 percent – without a workforce contraction. “The workforce actually expanded, while the labor force participation rate – the share of working-age Americans who either have a job or are looking for one – held steady at a 34-year low of 63.3 percent,” Reuters reports. Yay, we held steady at our 34-year low!
National Journal was more considerably more glum than Reuters, noting that the April job growth came largely in the “health care, retail trade, and food services industry” – the latter two being the sort of job growth the media would consider unhealthy, if the President had an “R” after his name – and dwelling at length upon that shriveled workforce participation rate:
The economic blogosphere erupted this week with a debate over why that number has been so low and why so many people have dropped out of the labor force since the start of the Great Recession. Was the decrease a symptom of the weak job market, or just a sign of baby boomers starting to retire en masse?
Demographics and retirements certainly played some role, though economists cannot agree on the extent. About 6.7 million people have stopped looking for work since late 2007, estimates Heidi Shierholz, an economist with the left-leaning think tank, Economic Policy Institute. Roughly 3 to 5 million of them left because they could not find jobs, economists estimate.
Mind you, these are not people who collect unemployment insurance and send out resumes in search of their next gig. These are people who—at least, temporarily—have exited the workforce. In March, the jobs report showed that 496,000 had dropped out.
So, who are these so-called “missing workers?” Frustratingly, no one knows exactly who they are; why they left; and if they’ll ever return. “The size of the pool there and the gap between the potential labor force and the actual working force represents a huge loss of potential productivity,” says Shierholz.
Among other problems, an enduring reduction in the workforce participation rate would lead to reduced national productivity, more demand for federal and state benefits, and fewer taxpayers to fund them.
Economics website ZeroHedge, which has been a consistent, lonely voice in pointing out the devolution of the American jobs market into a land of temporary work and part-time “burger flipper” jobs, produced a chart of April’s job growth and sarcastically observed, “With the bulk of job additions in such ‘high paying’ sectors as leisure and hospitality, temp help and retail, one can see why corporate revenues are going nowhere fast.”
And since summer is upon us, we’ve got a wave of young people about to graduate high school and college, entering this atrophied job market for the first time. “It is a rough time to be a young person in America,” said Evan Feinberg, president of Generation Opportunity, which analyzes the unemployment data each month to produce a jobs report for the young demographic. “The effective youth unemployment rate is 16.1%, and with about 2 million college students graduating this month, there is no sign of an economic recovery for my generation. Half of all graduating seniors aren’t going to find meaningful work in the coming months. And it isn’t like politicians care – they spent this week pushing an Internet sales tax which hits our generation hardest. Reckless policies coming from Washington continue to prevent the next generation from prospering.”
Generation Opportunity’s youth unemployment rate for March was 16.2 percent, so April is a slight improvement, but not the kind of robust growth that new graduates want to see. Especially when that ZeroHedge chart of April’s new jobs is considered. Young people who pile up six figures of debt in college aren’t looking for work in the hospitality, temp, or food service industries.
Update: Former Florida congressman Allen West summed up the new jobs report in a Tweet. The “U6” number he refers to is the broader standard of unemployment that includes marginal workers and people who have been unemployed for a long time, but have not exited the workforce entirely. It stands to reason that the U-6 number would rise if the very long-term unemployed, who had dropped completely off the Bureau of Labor Statistics radar screen, began re-entering the workforce, but it can also increase because people go without jobs long enough to drop out of the more widely reported U-3 figure.
Can’t view 7.6% in a vacuum. Youth > 20% Black >12% U6 >13% But Dow Jones fine as gov prints $$ and pumps it into economy. House of cards.
— Allen West (@AllenWest) May 3, 2013
Update: James Pethokoukis of the American Enterprise Institute notes that the number of “involuntary part-time workers” in the April jobs report – that is, people who are compelled to accept part-time work because their hours have been cut, or they can’t find full-time jobs – increased by almost the same amount as overall job creation. That’s also one of the reasons the U-6 figure increased.
And the number of hours available in the average work week decreased as well, a combination Pethokoukis says should raise “red flags” about everyone’s favorite legislative disaster:
What’s more, there was 0.2 hour decline in the length of the average workweek. This led to 0.4 percentage point drop in the index of average weekly hours, “equaling the largest declines since the recovery began,” notes economist Dean Baker of Center for Economic and Policy Research.
Let’s see, more part timers and fewer hours worked. Economist Douglas Holtz-Eakin says what we’re all thinking: “This is not good news as it reflects the reliance on part-time work. … the decline in hours and rise of part-time work is troubling in light of anecdotal reports of the impact of the Affordable Care Act.”