RAY SUAREZ: Overall, it was the best jobs report since 2009.
To help us look at developments big and small behind the numbers, we turn to Diane Swonk, senior managing director and chief economist for Mesirow Financial, a diversified financial services firm based in Chicago, and Daniel Gross, global business editor and a columnist for Newsweek and The Daily Beast.
Diane Swonk, what does it tell you that even amidst all the Washington crises and the deadlines and the cliffhangers, job growth remains solid?
DIANE SWONK, Mesirow Financial Holdings, Inc.: Well, it is certainly welcome news to see, particularly the private sector generating almost 250,000 jobs during the month, and, as you noted earlier, the increase in jobs in the construction sector, some fall-over on the imprint of housing there, also on manufacturing and the manufacturing sector.
Lumber production was up, employment, along with construction materials. So you are seeing that spillover of the housing market finally showing signs of healing after being dormant so long. We’re also seeing some of the aftermath of superstorm Sandy in there as well.
But I think it’s important that we’re seeing really more broad-based gains in the private sector than we have seen in the past. And that’s encouraging. The problem is, it is amidst all this uncertainty. And we have yet to see the other shoe to drop in terms of the cuts in spending, particularly in defense and health care going forward.
RAY SUAREZ: Dan Gross, again, through all these things, even through the election, even through the aftermath, job growth has remained pretty consistent.
DANIEL GROSS, Newsweek/ The Daily Beast Yes.
Well, I think the political system in the last year-and-a-half has really vastly overstated its impact on the job market and the economy at large.
People thought when we had that debt crisis in Aug. of 2011, that we were going to go into another recession. We didn’t.
A lot of pundits kept saying, oh, no one is going to hire because there is an election. No one is going to hire because there is a fiscal cliff. No one is going to hire because of Obamacare. No one is going to hire because of the sequester.
None of that turns out to be true. When you get rising demand — we have had sustained growth in this economy going on almost four years now. So when more customers show up, you hire people to do the work. Our exports remain at quite high levels. They have bounced back very sharply.
And you add what Diane was talking about, the housing market, which is becoming a pretty substantial contributor to economic growth, not just through the hiring of people for construction jobs. But the higher volume of sales is more work for brokers and insurance agents and mortgage brokers and that whole industry.
And, of course, rising home prices, which we are getting, makes people feel better and in a better position to consume.
RAY SUAREZ: Diane Swonk, behind those two big aggregated numbers, 236,000 and 7.7 percent, the monthly report includes a lot of other data. What would you turn us to, to look at — to get a bigger picture of the job market overall?
DIANE SWONK: Well, again, it gets us to this issue of good, but not good enough.
I do agree that the economy is in a recovery, and I think we could be at a turning point where we see more substantial job growth if we don’t have some of the cuts that we have hanging out there. That said, I think it’s really important to understand the sort of ongoing pain in the economy as well. The 7.7 percent, we got there in part by some — the wrong ways to get there, not the right ways.
And that is that people weren’t throwing their hat in the ring as much. Participation rates fell. You noted the number of people who gave up, who didn’t look for work. The labor force actually shrunk. And what you would like to see for a more sustained recovery — and it might have just been the weather. It could have been anything. Consumers actually said they were more hopeful and optimistic about the job market when they were asked about it in the attitude surveys in the month of February.
But they didn’t actually put that perception into reality, throw their hat in the ring and actually look for a job. And that’s what you really want to see for a more sustained and substantial recovery and one that really brings down the unemployment rate more fundamentally.
One of the other issues is the persistence of the long-termed unemployed. We have been sort of eroding away at that. It’s been a sticking point for the last couple months, the number of people that are employed more than 27 weeks. And that’s something that the Federal Reserve has brought up as a particular concern to them, because they are worried that those people have been unemployed for so long could become permanently unemployed.
RAY SUAREZ: Daniel, along with the low labor force participation rate that Diane mentioned and also the stubbornly high long-term unemployment rate, hourly wages hardly budged, four cents an hour from the previous report. And it’s wages that drive more spending, that drives more employment, doesn’t it?
DANIEL GROSS: Absolutely.
I think on the year wages were up by 2.1 percent. One of the big — it’s a story that has been covered, but I don’t think with sufficient detail, is that, you know, companies have really distinguished themselves in this recovery since 2009 in their ability to increase profits, find new markets, boost their sales and especially boost their profits.
Corporate profits are really at a record high. They have a record amount of cash on hand. They have been able to do that in part because they’re finding new markets in places like China and India. But they have also been able to do that by really sort of beating up on their workers in the sense that they’re getting them to work harder, more productively, more hours, do more work without really paying them much more.
And over the long — you know, that is a real issue in our economy, because most people, you know, they spend almost all of what they earn. Their ability to enjoy a quality of life and to invest is based on their wages. And we are going to get to a point in this recovery where companies are going to have to sort of give it up.
In other words, they’re going have to voluntarily pay a little more and make a conscious effort to pay their workers a little more in order to keep giving them the tools to consume a little more.
RAY SUAREZ: Diane Swonk, do you agree?
DIANE SWONK: I do.
And, in fact, I would go a little further on that and say that unfortunately that point in time is not likely to come for some time to come. We still have a lot of excess workers out there looking for work, more workers than we have jobs to employ them. And even though it is whittling away at the unemployment rate, really not taking it to down substantially, and that is the real problem.
The wage gains that we’re seeing, too, there is really unevenness within sectors. Even the health care sector, which has been the star of the labor market for some years now, you’re seeing a lot of hiring by lower-wage personnel, technicians replacing higher-wage nurses in some cases.
This month, nursing employment did increase, but that wasn’t where the bulk of the employment gains were in health care. A lot of it was in lesser-paid, lower-tech people. And what you are seeing is many health care providers, for justifiable reasons, because they are being squeezed as well, are trying to squeeze cost out of the system. But it is hurting some of those workers that have been doing so well, like nurses.
Some nurses are seeing as much as 20 percent in their pay cut as well, and so all of those things add up to be very uneven for the economy and leads to the sort of, you know, we are gaining jobs, which is increasing income after a big drop in the month of January. But we’re not gaining wages. So for the individual, it feels like they’re sort of spinning their wheels a bit.
RAY SUAREZ: You know, when we came out of the deepest part of the trough during the last four years, there would be the occasional good monthly report, and people like you, Diane, and people like you, Dan, would say we’re not out of the woods yet.
Before we go tonight, what does out of the woods or at least coming out of the woods look like? What should people be looking for, Dan Gross?
DANIEL GROSS: Well, I think a few more reports like this — 250,000 jobs is pretty good. You annualize that over the course of a year, it’s three million.
Over the past 12 months, we got two million. And I would actually look, you know, drilling down, we have had the situation the last few years where the private sector adds jobs every month, but the public sector, which is federal, state and local government, cuts them, 10,000 here, 20,000 there. Over the past three years, the public sector has cut 1.1 million jobs.
So if government had managed to maintain its employment levels, we would have a much different unemployment rate and a much different jobs picture. We like to think the Europeans are doing austerity, and that’s kind of self-destructive. But at the state level, at the local level, and to a lesser degree at the federal level, we have really been having austerity policies in terms of cutting spending by cutting employment.
If that finally lifts, if governments are in a position where they are not firing teachers and are hiring construction workers and cops and firefighters again, that would add to the labor growth that we’re having, and it wouldn’t just be the private sector doing it.
RAY SUAREZ: And, Diane, quick final thoughts.
DIANE SWONK: Final thought is, I really want to see that participation rate come back. Some of it is because people are aging, but that’s not all the reason we have seen the decline in it.
You want to see a sign of hope out there. The best sign that the recovery in the labor market is sustainable is that people really believe they can put their hat in the ring and get a job when they are looking for a job.
RAY SUAREZ: Diane Swonk and Daniel Gross, thanks for joining us.
DANIEL GROSS: Thank you.
JEFFREY BROWN: Online, economics correspondent Paul Solman breaks down the numbers using his unique measurement of unemployment. That’s on our Making Sen$e page.