JUDY WOODRUFF: This has been an important week for gauging the health of the U.S. economy.
We learned on Wednesday that growth was better than expected. And today’s jobs report shows solid hiring again. It points toward a strengthening economy, especially when compared to the earlier parts of this recovery.
But the limits of the labor market are still very apparent, as NewsHour economics correspondent Paul Solman found out, part of his ongoing reporting Making Sense of financial news.
PAUL SOLMAN: The July jobs jump was a bit lower than expected, but it still marked the sixth month in a row the economy grew by 200,000-plus jobs, according to the survey of employers. The last time that happened? 1997.
JUSTIN WOLFERS, Brookings Institution: The recovery continues. Call the economy right now the little engine that could. It keeps on puffing — huffing and puffing, getting us up out of the hole that the great recession created.
PAUL SOLMAN: Economist Justin Wolfers is a senior fellow at the Brookings Institution.
JUSTIN WOLFERS: It’s not spectacular, but we’re creating enough jobs that we’re really starting to make progress.
PAUL SOLMAN: More evidence: Employers added 15,000 more jobs in May and June than was first reported. And employment growth was fairly broad-based, from engineering, to retail and manufacturing.
But at the same time, the unemployment rate, based on the monthly survey of households, rose slightly, from 6.1 to 6.2 percent. What does Wolfers make of that?
JUSTIN WOLFERS: That’s statistical noise. What we’re seeing is the unemployment rate falling a quarter-point and a half-point over the last three and six months, getting people back to work. There’s still a lot to get back to work, but if we keeps going at this pace, we’re going to bring them all back.
PAUL SOLMAN: MIT Nobel laureate economist Peter Diamond is also encouraged by the job gains, but he’s been tracking more troubling trends in the labor market as well.
PETER DIAMOND, Massachusetts Institute of Technology: The very large number of people who have part-time jobs and want full-time jobs, the very large number of people who were discouraged workers who would like jobs, but weren’t actually searching, and the variable that to me is a big clue to what’s going on, how extremely low the quit rate is.
PAUL SOLMAN: The quit rate?
PETER DIAMOND: The workers who quit because they have confidence they can get a better job. They’re way low, and that’s a sign of a weak labor market. That’s the reason wages are not doing as well as you might expect, given the hires and given the steady drops in the unemployment rate.
PAUL SOLMAN: Compared to pre-crash days, says Diamond, some 400,000 to 500,000 less quits per month.
So, you mean somewhere near half-a-million fewer Americans per month are leaving jobs to get new ones, meaning that half-a-million jobs that would have been available to people who were unemployed aren’t?
PETER DIAMOND: Yes. The way the job market works is, people move up not just a job ladder with seniority inside a sizable firm, but by moving from firm to firm, from lower-paid jobs to higher-paid jobs.
PAUL SOLMAN: Indeed, wages rose just a penny an hour in July, an annual rate of half-a-percent.
JUSTIN WOLFERS: There’s so much pressure from the people without work that those who do have work can’t or don’t feel ready to ask for a wage raise.
PAUL SOLMAN: And, Wolfers adds, fewer people quitting their jobs, and less turnover in the jobs market in general, has other implications.
JUSTIN WOLFERS: The burden of unemployment is being borne by a small number of people. So there are two ways we could have 6 percent unemployment: It could be a lot of turnover and each of us unemployed for a short period of time, or not much turnover and the burden being borne by a smaller number of people unemployed for a much longer period. And, unfortunately, that’s the situation we’re in.
So this reduced turnover and dynamism is — also largely explains why it is that long-term unemployment remains so high, and I think remains the biggest problem for this recovery.
PAUL SOLMAN: So when headlines say, good news, 200,000 or more new jobs being created every month, you say, in context, not so good, because there isn’t nearly as much churn in the economy, not nearly as many people leaving jobs for new jobs as there had been.
PETER DIAMOND: That’s right. When you think about churn in the labor market, it’s a good thing, because it’s a vital part of how we get our labor market to be more efficient.
PAUL SOLMAN: But isn’t the overall drop in unemployment a very good thing, we asked Diamond.
PETER DIAMOND: That is progress. And if it had happened in half the length of time, think how much better off we would have been.