This is the follow-up to my first two posts on the January Employment Situation Report and the muddled picture it paints. The first post here recounts how there’s some apparent contradiction with the headline unemployment rate declining from 9,4% to 9.0% (yeah!) but only 36,000 new jobs created (not good at all). The second post explains some methodology behind the numbers to try to resolve the contradictions. Now I’m going to offer what I think it tells us.
Many commentators, particularly the talking heads on the financial news channels but also some leading economists and analysts have decided this was a pretty decent report. James Hamilton as well as Nomura Securities has concluded it’s good news. Calculated Risk seems to think that underlying the report is good news but that winter distorted the report. I beg to differ. Now I have no great computer models or crystal balls like many analysts, but I’m more in the camp with Mark Thoma who emphasizes the level and scale of unemployment and concludes we simply aren’t improving fast enough.
Let’s look at this graph from Calculated Risk and compare this “recovery” to all the post WWII recessions:
This graph shows the job losses from the start of the employment recession, in percentage terms – this time aligned at maximum job losses. In the previous post, the graph showed the job losses aligned at the start of the recession.
In terms of lost payroll jobs, the 2007 recession is by far the worst since WWII, and the “recovery” for payroll jobs is one of the slowest.
Yes, I will agree that positive jobs growth is better than no jobs growth or jobs elimination. Yes, the red line in this graph is going up. But it’s rising at an unacceptably slow rate. My screen isn’t wide enough to project out when that line is going to show us getting back to number of jobs we had when this mess began – back before Wall Street blew up the economy. But it seems to me that too many analysts are concluding something along the lines of “well, the snow and winter distorted the numbers. Without the snow, there probably would have been another 100,000 jobs and that’s OK.” I’m sorry, even if we grant their arguement that that snow caused us to underestimate new jobs by 125,000, it is still too little too slow. We need 150,000 jobs a month just to stay even with a growing population. For this to be a true recovery that includes all of America, not just the lucky ones on Wall Street or in Washington, we need to see a lot faster increases in growth – increases we haven’t seen since 1984.
Just to repeat here’s our real situation:
- 6.21 million people have been unemployed for more than 26 weeks.
- 8.4 million workers have part-time jobs but want full-time work and cannot get it.
- 16.1% of our workforce wants to work full-time and our economy cannot put them to work fully
- There are still 5.5% fewer jobs in the economy than there were 3 years and 1 month ago, despite a growing population.
- The present rate of “recovery” will have us get those jobs back after another 3+ years.
The issue I think most analysts have missed in this report is the effect that the “99’ers” are having on the report. The “99ers” are unemployed people who have exhausted the maximum 99 weeks of unemployment compensation. Let’s face it, after 99 weeks of looking and not finding a job, you are most likely to quit looking until it appears like a real recovery in your area. When Congress decided in December 2010 to not create another tier of unemployment benefits and extend benefits for these people, the fell off the unemployment compensation rolls. That also means there’s no reason to keep “actively” searching. So they have started to drop out of the labor force. That’s why labor force participation rate has continued to decline. This is not good. This is treating the unemployed as if they are invisible – the disappeared workers.
I’m going to add one post to this series. In the next one I’ll look at alternative data series that makes the news that can help give some us some idea of what’s happening in employment.