MAKING SENSE -- October 22, 2013 at 4:07 PM ET
More than 25M Americans still can't get a full-time job
Our own unemployment metric, the "Solman Scale," found unemployment ticked down slightly to 15.6 percent. Photo courtesy of John Moore/Getty Images.
Not yeah! Not feh! But, as has been the usual response to most monthly jobs reports since the recovery began four years ago, more like meh.
I'm collecting non-inspiring adjectives if anyone has others. Soft, tepid, meh. Others? RT @djheakin: This is an extremely flat report— Neil Irwin (@Neil_Irwin) October 22, 2013
That's one way to express the sentiment most frequently heard today about the September numbers, 18 days delayed due to the partial government shutdown.
Yes, unemployment is down a tad, though I continue to see evidence that it's because of those 10,000 baby boomers a day hitting retirement age, and most of them, if not so many as in the past, calling it quits. (The evidence is a slightly shrinking labor force, even as the population grows.)
Yes, 148,000 jobs were created, if we're to believe this month's numbers and yes, the summer jobs total was revised upward by 9,000.
But as the Atlanta Federal Reserve's glum calculator reveals, to achieve the "full employment" rate of 4 percent last seen under President Bill Clinton, the economy would need to add 143,000 jobs a month for more than a dozen years. Non-stop.
Yes, our own all-inclusive reckoning of under- and unemployment, "U-7," reported here every month, ticked down to 15.6 percent from 15.7 percent. But that still represents 25,278,000 of our fellow Americans who say they want a full-time job but can't find one.
Our "Solman Scale" calculates the "U-7" at 15.6 percent, adding to the officially unemployed part-timers looking for full-time work and "discouraged" workers -- everyone who didn't look for a job in the past week but says they want one.
And of those out of work entirely, the average time on the bench remains, by historical standards, a European-like 37 weeks, though the explanation usually given for long stretches of unemployment in Europe was that generous welfare state benefits induced folks to remain idle.
As Harvard labor economist Richard Freeman reminded me this morning, it's a lot harder to make that case here in America.
Other highlights: no growth in federal government jobs, suggesting -- unsurprisingly, given sequestration -- that austerity in that sector continues.
Health care, after having been the engine of job growth for years, added a mere 7,000 jobs.
Since the beginning of 2013, employment growth in health care has averaged 19,000 per month, compared with 27,000 per month in 2012.— David Wessel (@davidmwessel) October 22, 2013
"We would love to see a leveling off of health care growth," Freeman explained to me, "because it makes health care less expensive and it's more productive. ... But then we have to add jobs elsewhere in the economy."
And Freeman was skeptical that this was the effect of the Affordable Care Act. "Remember these numbers are from before the shutdown, and from before, really I think the Affordable Care Act began taking effect," he said.
And of course no movement on the teen job front, where more than 20 percent of kids 16-19 who are actively looking for work can't find any, reminding me of the most stunning jobs number we've come across yet this year, as reported to us by Northeastern University economist Andrew Sum: if you are a poor African-American high school teenage dropout, your likelihood of being employed is -- 5 percent.
How's It Playing?
We round up some of the responses to and analysis of this morning's jobs numbers from Twitter and print media.
The Washington Post's Neil Irwin summarized the feeling of economists and journalists starting their Tuesday mornings with the delayed jobs report at 8:30 a.m.:
The best part of jobs Friday is the feeling that once you're through the initial rush, the weekend has begun. Jobs Tuesday is the worst.— Neil Irwin (@Neil_Irwin) October 22, 2013
The headlines to which the rest of America woke were similarly downbeat, but about the numbers themselves.
Tepid U.S. job growth supports Fed's cautionary stance (Reuters); Delayed Jobs Report Finds U.S. Adding Only 148,000 Jobs (New York Times); Payrolls in U.S. Rise Less Than Forecast (Bloomberg).
But it wasn't all bad news, as the Wall Street Journal's live blog reported (Mostly Good News in Drop in Unemployment Rate):
"In contrast to recent months, the drop in the main unemployment rate was almost totally for positive reasons. The number of people employed jumped by about 133,000, while the number of people who said they were unemployed dropped by 61,000."
"First Take: Not many jobs -- but the right kind" read one headline in USA Today. "The good news is that several sectors that are essential to the hopes for a 2014 recovery that makes a real difference in people's incomes and prospects did very well in September," wrote Tim Mullaney, drawing particular attention to 20,000 added construction jobs.
But many observers noted that the news wasn't good enough; it was more of the same.
As Atlantic Wire's Connor Simpson writes, "Stagnation will be the word at the end of every pundit's tongue by the end of the day, as the words 'unchanged' and 'little changed' appear over and over throughout the jobs report..."
Good news: long-term unemployment down 144,000. Bad news: Probably because the long-term unemployed are giving up as benefits expire.— Matt O'Brien (@ObsoleteDogma) October 22, 2013
"Unemployment fell nationally, but it's still 10 percent or more in 28 metro areas", writes Washington Post's Niraj Chokshi.
64.6% of people 25+ working or looking for jobs in Sept. lowest labor force participation rate since 1986— David Wessel (@davidmwessel) October 22, 2013
And as WonkBlog's Neil Irwin cautions:
If there is any good news to be found, it is that the unemployment rate is now the lowest it has been since November 2008. But, two important observations: November 2008 was hardly the best of times for the U.S. economy. And much of that decline has occurred because of people dropping out of the workforce; the ratio of Americans who have a job is basically unchanged over the last four years.
The Justin Wolfers and Betsey Stevenson household independently delivered some helpful charts this morning.
Chart: Non-farm payrolls growth since Jan 2011: ▁▅▅█▂▅▁▃▆▄▄▆█▇▅▂▃▂▄▄▃▄▆▆▃█▃▅▄▄▂▅▃ The fact that the recent bars are smaller is worrying— Justin Wolfers (@JustinWolfers) October 22, 2013
I forgot the charts! Here's a chart showing the recent opening in the unemployment gap by gender: pic.twitter.com/QctR66Sb9T— Betsey Stevenson (@CEABetsey) October 22, 2013
What Does This Mean for Fed Policy?
Much of the reaction to September's delayed release concerned its effect on Federal Open Markets Committee policy. The shutdown and Washington's fiscal drama stole the show from the Fed this fall, who as you may recall, made headlines with their decision not to dial back their quantitative easing policy last month.
After spooking the markets in June with the prediction that 7 percent unemployment would be a reasonable threshold for tapering the purchase of assets, the Fed came out with a much more tempered announcement last month, saying there was not strong enough data supporting existence of labor market improvement to taper. Fed Chair Ben Bernanke remained vague on an unemployment target to begin tapering last month, but left the door open to it starting this year.
September's official unemployment rate decreased (good sign), but the number of jobs added was not as high as expected (or needed), which is a reminder that the "U3" (official unemployment) and the payroll figures come from different surveys (the former from households and the latter from employers) and that they can tell very different stories. The Wall Street Journal's Jon Hilsenrath explains:
This worsens a conundrum for Fed officials. They have linked their two signature programs -- bond-buying and a commitment to keep interest rates low -- to the behavior of the unemployment rate. But the unemployment rate is behaving in peculiar ways. It is coming down as people leave the labor force and exit the tallies of those seeking employment. In normal times, the labor force grows as the population grows, and employment must grow in excess of that labor force growth in order to reduce the unemployment rate. Now, because the labor force isn't growing much, even small employment gains are bringing down the unemployment rate, even though millions of Americans remain parked on the sidelines.
Bernanke suggested as much in his September press conference, admitting that the "U3" does not by itself give a complete picture of the labor market.
Economists overwhelmingly took the stagnant employment data this month as a sign that the economy is not healthy enough for the Fed to begin tapering.
I see we're still in the bad-news-is-good-news zone. The debt ceiling stuff almost made me forget that the only thing that matters is TAPER— felix salmon (@felixsalmon) October 22, 2013
It's possible the Fed could make moves in the direction of tapering at one of their two remaining meetings of 2013, first at the end of October and then again in December. But it's looking unlikely since all of the jobs reports between now and then will be affected by the government shutdown. (Next month's report is a week delayed, to be released Nov. 8.) We won't see the next "clean" jobs report (clean meaning unaffected by the shutdown) until the release of December data in January 2014.
As Hilsenrath wrote, Bernanke's 7-percent-threshold-for-tapering "roadmap looks like it has now been stuffed under the car seat."
And according to the median of 40 responses in a Bloomberg survey last week, "The central bankers will pare the monthly pace of asset buying to $70 billion from $85 billion at their March 18-19 meeting."
I now predict the taper will begin NO later than July of 2037. Mark it down.— Ben White (@morningmoneyben) October 22, 2013
"Bottom line," Bloomberg View's Caroline Baum writes, "If the Fed is waiting for an improvement in the outlook for the labor market before pulling the chord, it has a lot more watching and waiting to do."