Another 200K jobs for ‘The Little Engine That Could’
It wasn’t the month that last month was, and it was less than expected on Wall Street, but July was the sixth straight month to post job gains over 200,000.
Given the statistical noise that plagues all of the Bureau of Labor Statistics data, it’s hard to distinguish July’s 209,000 payrolls from the expected 230,000 or even from last month’s 298,000 — yet another reminder, as economists on this page often repeat, that one month’s data should never speak for itself. Remember, the margin of error for the number of jobs added is about 90,000 jobs.
What matters is the long-term trends, and in that department, at least, the economy is what the Brookings Institution’s Justin Wolfers called, “The Little Engine That Could,” chugging along at a slow, but steady pace. As President Obama said from the White House briefing room Friday, “Our engines are revving a little bit louder.” In fact, growth this steady — six months of 200,000-plus gains — hasn’t happened since 1997.
But this time last month, we were also heralding the lowest unemployment rate since the collapse of Lehman Brothers in 2008. This month, the unemployment rate actually went back up — to 6.2 percent, as did Making Sen$e’s own more inclusive measure of unemployment, which adds to the officially unemployed both part-timers looking for full-time work and workers who say they want a job but haven’t actively looked for more than a year (see below).
But the increase in the headline unemployment rate, most economists agree, is hardly cause for concern.
For starters, that small increase might reflect the return of some workers to the labor force. There were about 120,000 fewer people not in the labor force, and nearly 200,000 more people unemployed in July than June. Here’s the potentially positive part: If those people are being counted as officially unemployed by the BLS, they’re at least searching for a job. (As economists lamented on this page for much of 2013, the unemployment rate artificially declined because Americans were dropping out of the labor force and not looking for work.)
But the bottom line with the increase in the rate from the household survey — in this case, one-tenth of a percent — is that it isn’t really significant, especially considering such notoriously noisy data.
“A small number of people are changing what they’re doing — in a job market that’s way too big to focus on one tenth of one percentage point anywhere,” Wolfers said. The number of jobs added, then, would seem to be more indicative of a recovery. If the U.S. continues to create more than 200,000 jobs a month, Wolfers said, the unemployment rate will eventually fall.
A steady recovery, however, isn’t to say that it isn’t a slow recovery, especially for the millions of unemployed Americans. Lest we forget just how many of them there are, consider this visual from Wolfers: The unemployed, standing side-by-side, would stretch from New York to San Francisco. And historically, Wolfers reminded us, 6.2 percent unemployment would have been pretty bad. It’s easy to forget that, though, given where the economy has been. “Things were terrible,” said Wolfers. “They’re now merely bad.”
Long-term unemployment remains the thorn in the labor market’s side, increasing last month by 74,000. This is a recovery, Wolfers explained, where a small number of people are bearing the burden of unemployment for a longer period of time.
One reason for that is what MIT’s Peter Diamond calls a low “quit rate.” When times are good, workers have the confidence to quit their jobs and look for new ones. In this economy, however, workers are staying put. In fact, Diamond says, about 400,000 fewer people per month are quitting their jobs than before the recession. If workers cling to the jobs they have, that reduces what labor market analysts call “churn” — or the turnover of people from job to job. Naturally, if employees are too scared to leave one opportunity, even if the wages and hours aren’t what they’d like them to be, that creates fewer openings for other people.
More turnover in the labor market, Wolfers added, would help bring back the long-term unemployed, whose skills have suffered from loss of contact with the job market. Even if more churn caused some people to lose their jobs too, Wolfers said, “anything we can do to reduce the average duration of unemployment would be a good thing.” The worry, he said, is that those long-term unemployed may never come back.
In that sense, both economists agree, the unemployment rate makes this country’s unemployment situation look much better than it is, ignoring the Americans whose struggles are hidden in the nearly 25 tables of the BLS’s monthly report. The number of involuntary part-time workers, for example, remains elevated after spiking last month. These are people who need and want to work full-time but can’t find the paid hours to do so.
So can we do better, or is this as good as it’s going to get? The fact that the quit rate remains low, Diamond said, underscores that this isn’t business as usual; this is a weak labor market that could be doing better.
Wolfers agreed. “There’s lots and lots of people without work, and at the moment there’s no pressure pushing wages up, which tells me there’s a whole heck of a lot more people out there trying to find work, trying to get their way back into the labor market.”
Historically, Wolfers said, the U.S. labor market has been known for its high rates of turnover, so there’s no question things could look better. We’re just not moving in that direction as fast as he or Diamond — or the 9.7 million unemployed, for that matter — would like to see.