September unemployment: the quagmire continues
The September unemployment report was delayed by the government shutdown, and it’s bad enough to make you wish the shutdown was still running. A summary from Forbes:
Employers added 148,000 jobs in September, well below the 180,000 that many economists expected. The unemployment rate dropped slightly to 7.2% from 7.3% in August. And the labor force participation rate remained 63.2%. The private-sector accounted for 126,000 of the jobs added.
Anticipation for the report was high. CNBC even ran a jobs report count down this morning, but many people also debated how meaningful the numbers really are two weeks late. Pre-market trading is yet to show a clear investor response to the numbers.
Status quo isn’t so good when the quo is this low. For the benefit of anyone tempted to believe the late drama in Washington either caused, or corrupted, these disappointing numbers, Forbes notes that “data was largely collected before the shutdown.”
We’re incessantly told not to read too much into a single job report, and indeed, when a month of disappointing growth well below both expectations and the population-growth limit leads to virtually unchanged workforce and unemployment metrics, there’s probably a bit of statistical noise to be dealt with. We’ve also grown well accustomed to revisions in future months, which are sometimes positive – August job growth was revised upward with this month’s report, while July was revised down.
So how are the long-term trends looking? James Pethokoukis of the American Enterprise Institute offers some observations about a “decelerating labor market – not one that’s gaining momentum.”
As economist Justin Wolfers points out, quarterly job growth over the past four quarters has declined from 209,000 (4Q 2012) to 207,000 (1Q 2013) to 182,000 (2Q 2013) to 143,000 (3Q 2013).
To put that quarterly number in context: At a 143,000 jobs a month, it would take until 2022 — eight years and 10 months — before the job market returned to pre-Great Recession levels, according to the Hamilton Project’s Jobs Gap calculator.
Pethokoukis always takes the time to calculate what the “headline” unemployment rate would be, if the workforce was still at 2009 levels. We would currently be standing at 11.2 percent unemployment if the workforce had not collapsed. Of course, there isn’t much political appetite for such a painfully honest metric.
Also painfully honest were a few of the analysts quoted by CNBC:
“This kind of report adds to the sense of foreboding about our economy,” said Claire McKenna, policy analyst at the National Employment Law Project.
Financial markets greeted the report with enthusiasm though, boosting stock futures on expectations that monetary stimulus will remain in place.
A broader measure of unemployment that takes into account the underemployed and those who have quit looking for work also edged lower, to 13.6 percent.
“Today’s blistering jobs report has quickly reminded America that our economic problems are getting worse, despite talking point reassurances from Federal Reserve officials,” said Todd Schoenberger, managing partner at LandColt Capital.
[...] “You would think by now you would be consistently creating over a couple hundred-thousand jobs a month, at least,” said Brad Levitt, senior economist for Oppenheimer Funds. “The Fed wants to see over 200,000 jobs a month on a consistent basis before a change of policy.”
That’s an interesting observation… the Fed considers 200,000 jobs a month, on a consistent basis, the threshold of success that will prompt them to march the quantitative easing unicorns off their treadmills and stop printing money? That really shouldn’t be a difficult level for an economy as large and diverse as the United States to meet. It’s not all that far above the number of new jobs required to keep pace with population growth.
And Obama’s economy can’t do it. I don’t recall more than a few brief spurts of 200k job creation over the past five years. If job creation really was his top priority, as he intermittently asks us to believe, the inability to remain above the 200k threshold would be a terrible indictment of his policy skills. But it’s not his top priority – never has been, never will be, not even close. The resulting half-decade of doldrums are an unsurprising result.
How much of this month’s weak numbers were prompted by the “sense of foreboding” surrounding the launch of ObamaCare, and what will the market make of the uncertainty caused by ticking doomsday clocks – mid-November to fix the online system, mid-December to meet enrollment targets, mid-February as the drop-dead date to avoid individual mandate penalties? It’s not the sort of stable environment that would inspire employers to rush out and make long-term hiring commitments.
If we do manage to achieve a stable growth environment one of these days, what price will the American economy have paid for years of grinding unemployment? “The consequences of long-term unemployment can bedevil young Americans long after they find a job,” writes Walter Russell Mead at The American Interest. “Skills depreciate, savings either empty out or fail to accumulate in the first place, and lack of experience or a professional network can make it even harder to find work.”
Mead goes on to discuss the danger this poses to the already horrifying mountain of Social Security and Medicare liability towering over us. In order to keep the 20th Century’s Ponzi schemes going, a vital workforce of wealth-generating young people is required. But the past five years have been particularly hard on young people, depriving them of both entry-level opportunities and vital steps up the career ladder. “The longer millennials are out of the work force, the less likely they are to earn middle-class wages in their future careers, yet they will be expected to finance entitlement programs for boomers,” Mead warns.
Years of high unemployment are not a New Normal we can learn to live with. The long-term damage inflicted by such a long non-recovery puts us at risk of greater damage from the next economic crisis, and also leaves us ill-prepared to handle the pressure of accumulated national debt. The American people should not be satisfied with near-stagnation that oozes along for years on end, but in any event, our government and economy are a two-headed beast that will swiftly die beneath the weight of its blubber if it stops moving forward.