TOPICS > Economy

Dueling Data on Jobs in July: More Created But Didn’t Outpace Unemployment

August 3, 2012 at 12:00 AM EST
Though 163,000 jobs were created in the month of July, the unemployment rate rose to 8.3 percent. Jeffrey Brown talks to former Labor Department chief economist Lisa Lynch and University of California, Berkeley's Enrico Moretti on why the pace for job growth still lags behind demand.
LISTEN SEE PODCASTS

TRANSCRIPT

JEFFREY BROWN: The number of new American jobs was higher in July, but so was the unemployment rate.

The dueling data left everyone to draw their own conclusions, from job-seekers to presidential hopefuls.

It was a hot July of getting away from it all for some and worrying about the economy for nearly everyone.  But, today, after three sluggish months, the Labor Department said that, in July, employers added 163,000 jobs, the most since February.

On average, there have been 151,000 jobs added each month this year, but that’s still not enough to push down the unemployment rate. And last month, the rate actually ticked up a tenth to 8.3 percent, as more people reported they were unemployed and the size of the labor force actually fell, glass half-full, glass half-empty.

The numbers were ready fodder for the presidential candidates.

Republican Mitt Romney spoke in Las Vegas.

The economic fortunes of American cities are diverging. And the difference between cities that are doing well and cities that are struggling has never been larger. And, yet, mobility rates are very low today, and they're particularly low for low-skill workers, workers with a high school degree or with -- workers who drop out from high school are the least mobile of all.Enrico Moretti, University of California, Berkeley

MITT ROMNEY (R): Today, we just got a new number from the unemployment report, and it’s another hammer blow to the struggling middle-class families of America, because the president has not had policies that put American families back to work.

These numbers are not just statistics. These are real people really suffering, having hard times, 23 million Americans out of work, or stopped looking for work, or way underemployed, 23 million.

JEFFREY BROWN: But, in Washington, President Obama saw evidence that the economy is slowly getting stronger.

PRESIDENT BARACK OBAMA: This morning, we learned that our businesses created 172,000 new jobs in the month of July. That means that we have now created 4.5 million new jobs over the last 29 months and 1.1 million new jobs so far this year.

Those are neighbors and family members finding work and the security that comes with work.  

JEFFREY BROWN: Markets also reacted well to today’s news. The Dow Jones industrial average gained 217 points to close at 13,096. The Nasdaq rose 58 points to close near 2,968. For the week, the Dow and the Nasdaq were up a fraction of a percent.

The employment gains in July were widespread. Manufacturing added 25,000 jobs. For restaurants and bars, it was 29,000. Retailers added 7,000 workers, and education and health had the biggest gain of all, 38,000 new workers.

On the downside, governments at all levels cut some 9,000 positions. Those still looking for work, like these in Chicago yesterday, will now digest the numbers to see what the future may hold.

DELVORINE ROBATEAU, Chicago: No income at this time. And I’m looking for a job for past year-and-a-half to — about 18 months now.

MARKUS KING, Chicago: The last few months that I have been looking for — I have just been optimistic, just trying to stay positive. Don’t think nothing negative, because then that will discourage you from looking for a job and trying to find employment.

JEFFREY BROWN: Ultimately, the July numbers may turn out to be somewhat better than they first appeared. The Labor Department’s monthly reports are always adjusted for seasonal factors, and July’s data is nearly always revised upward.

And we look more closely at the numbers now with Lisa Lynch, Dean of the Heller School for Social Policy and Management at Brandeis University and a former chief economist at the Labor Department, and Enrico Moretti, professor of economics at the University of California, Berkeley, and author of “The New Geography of Jobs,” which examines how and why hiring is stronger in some U.S. cities than in others.

Lisa Lynch, let me start with you.

Looking first at the overall number of job gains, this was better than expected, right?

LISA LYNCH, Brandeis University: Absolutely. We saw strong growth in the economy in terms of jobs and across a variety of sectors.

And economists had been forecasting much slower numbers, given what we had seen in the prior three months of pretty weak job growth and information that we had about the growth in the overall economy, the GDP growth being pretty weak in the last three, the prior three months to this employment report.

JEFFREY BROWN: Now, Lisa, at the same time, the rate inched up in spite of that hiring. Explain that to us.

LISA LYNCH: Well, it was interesting. We learned a little bit of math today.

The unemployment rate was reported as going up from 8.2 percent to 8.3 percent. But when you actually dig into the numbers, the unemployment rate went from 8.22 percent to 8.25 percent. And then the BLS just rounded it up to 8.3 percent. So we had three-hundredths-of-a-percent increase in the unemployment rate. That is essentially no change whatsoever in the unemployment rate.

And BLS did say that. But people right now are very obsessed on small movements in numbers and is the number going up or is the number going down, and so it doesn’t really matter what is the math behind it.

JEFFREY BROWN: But it doesn’t go down even as those — you get a higher number of jobs. I think that’s the confusing part.

LISA LYNCH: Well, that’s because we have two different surveys that are used to report information on what’s happening in the labor market.

We have a survey of employers, over 400,000 employers, that the employment number is drawn from. That’s a very large survey and does a reasonably good job at counting net changes in employment in the economy.

We have a smaller survey of about 60,000 households that’s used to calculate the unemployment rate and look at some of the demographic characteristics of unemployment, unemployment by schooling, unemployment by ethnicity. And that report is a much smaller sample, and there’s much more variation in those numbers from month to month.

JEFFREY BROWN: Enrico Moretti, before we get to this geography question, I just want to ask you, what do you see in today’s numbers or in recent numbers as we talk about a glass half-full or glass half-empty? What’s going on?

ENRICO MORETTI, University of California, Berkeley: The labor market is improving, but too slowly.

We need 150,000 new jobs each month just to absorb the young people entering the labor force. So, it’s not surprising that today’s numbers in terms of unemployment were not particularly good. The labor force participation rate, which is the fraction of adults with a job, is the lowest it has been in 20 years.

At the current pace, it is going to take eight to 10 years to go back to where we used to be six years ago. So, it is half-full, but it’s also half-empty.

JEFFREY BROWN: Well, so you have raised both short- and long-term thinking here. And I know when you talk about the geography of jobs, where the jobs are, you look long- and short-term.

Think short-term a little bit for us first. What does your work tell us about where the jobs are and where they’re not?

ENRICO MORETTI: Well, we think of the U.S. economy as one economy, but the reality is that there are 320 different economies, one for each metropolitan area in the country.

And you see some of these areas are doing OK. For example, North Dakota, South Dakota, some parts of it are doing very well. Unemployment rate is between 2 and 3 percent there. And that’s not surprising. Oil prices are high and oil production is high, and, therefore, oil employment is high.

More interestingly, you see cities like Seattle, Raleigh, Austin, and San Francisco doing very well. And there, the common denominator is high-tech and innovation. And this reflects a long-run trend, the increase in the economic conditions in cities that are able to attract high-tech and innovation companies.

JEFFREY BROWN: And can you draw longer conclusions from these trends when you look — try to look out at the shape of the economy, the growth of the economy and jobs in particular?

ENRICO MORETTI: Yes.

On one end, states like the Dakotas are lucky, because oil prices are high today, and there’s no guarantee they will remain high.

But cities that are able to secure a stable and thriving innovation sector have much better long-term prospects. We have seen over the past three decades a trend of growth in cities with a lot of high-educated, highly productive and highly creative workers.

And this is likely to continue and possibly accelerate.

JEFFREY BROWN: Now, Lisa Lynch, how do you — what do you see when you look geographically, especially when you try to fit it in — we’re talking about a month-by-month. And I know that only tells you so much. But what do you see when you think about the country geographically?

LISA LYNCH: Well, two things, just to follow up on what Enrico was saying.

First, on this issue of innovation, we see enormous differences in terms of the unemployment rate experienced by education. So people with a college degree have an unemployment rate of 4.1 percent. But if you have less than a high school degree, you have a 12.7 percent unemployment rate. So there’s huge discrepancies by education.

And then when we look geographically, say, for example, at the state level, which is a more aggregate level than what Enrico is talking about, if you go to a state like California or Nevada, where you have double-digit unemployment, and then when you add in the number of workers that have dropped out of the labor market because they’re discouraged with finding a job, but want a job, or the number of people that are working part-time, but want a full-time job, in both Nevada and California, you have one in five workers that is in that state.

So even in a state, for example, like California that has very dynamic cities, like San Francisco, you have other cities that are not that far away, say, Stockton, that are experiencing much higher unemployment. And it really comes down in large part to skill differences in the capacity of individuals to keep pace with this innovation.

JEFFREY BROWN: And I assume, Enrico Moretti, that it can be hard for people to move in many cases even nearby towns, especially with the housing problems and other such things that keep them where they are.

ENRICO MORETTI: It is true. It’s a paradox.

The economic fortunes of American cities are diverging. And the difference between cities that are doing well and cities that are struggling has never been larger. And, yet, mobility rates are very low today, and they’re particularly low for low-skill workers, workers with a high school degree or with — workers who drop out from high school are the least mobile of all.

And this is costing them tremendously in terms of foregone earnings and higher unemployment rates.

JEFFREY BROWN: OK, interesting in the short-term and thinking about the long-term.

Enrico Moretti and Lisa Lynch, thank you both very much.

ENRICO MORETTI: Thank you.

LISA LYNCH: Thank you, Jeff.

JEFFREY BROWN: And, as always, when the jobs numbers come out, NewsHour economics correspondent Paul Solman weighs in online with his own Solman Scale of unemployment. You will find Paul’s take on our Making Sense page.