FacebookTwitterGoogle+RedditEmail

The Bad News About Jobs

by DEAN BAKER

More than five years into the downturn it doesn’t take much to get people excited about the state of the economy. The Labor Department’s February employment report showing the economy generated a better-than-expected 236,000 jobs and the unemployment rate had fallen 0.2 percentage points to 7.7 percent was sufficient to get the optimists’ blood flowing. Unfortunately, they are likely to be disappointed.

First off, if the 236,000 jobs number sounds good to you than you probably are not old enough to remember 271,000 number reported last February or the 311,000 number reported in January of 2012. The strong winter job growth was followed by a dismal spring in which job growth slowed to a trickle.

While most economic measures implied that the economy suddenly shifted from hot to cold, the more obvious explanation was that unusually good winter weather in the Northeast and the Midwest pulled hiring forward, as some of us warned at the time. This is likely part of the story this year as well.

While few people in the northern part of the country have been sunbathing in January and February, we did not see the sort of severe snowstorms or sub-zero weather that typically leads to a few days without work in at least part of the region. This likely explains the 48,000 job growth reported for construction in February, as well as higher-than-expected growth in retail and temporary employment.

The drop in the unemployment rate is also not as good news as it may initially seem. The Labor Department reported that 130,000 people left the labor force in the month so they are no longer counted as unemployed. The percentage of the adult population that is employed—the employment-to-population ratio (EPOP) – was unchanged at 58.6 percent. This is just 0.4 percentage points above the low hit in the summer of 2011 and is unchanged over the last year.

While the unemployment rate has fallen back by 2.3 percentage points from its peak, reversing more than 40 percent of its increase, the EPOP is still down by 4.5 percentage points from its pre-recession level. The drop in unemployment is much more the result of people giving up the search for employment and leaving the labor force than workers finding new jobs.

The one genuinely encouraging piece of news in the February employment data is an uptick in wage growth. Over the last three months, average hourly earnings rose at a 2.85 percent annual rate compared with the prior three months. If this continues it would imply that workers are actually seeing real wage gains. Unfortunately, this increase was likely driven by some state minimum wage increases and the sort of random movements that causes these data to fluctuate erratically, but this is an item that the optimists can look to for hope.

Looking beyond this report, there is not much reason for optimism. Housing construction is rising but from a very low base. It had fallen back to just 2.0 percent of GDP, so even a 20 percent growth rate would add just 0.4 percentage points to GDP growth. The most recent data on investment shows a sharp drop, albeit after 3 months of good growth. We will be fortunate if this category grows at more than a 10 percent annual rate in 2013.

While an upward revision to the 4th quarter GDP data turned a negative 0.1 percent into a positive 0.1 percent, the economy still only grew at a 1.6 percent annual rate in the second half of 2012. Apart from the uptick in construction, there are few good reasons to expect much of an acceleration from this growth rate. On the other hand, the ending of the payroll tax cut will pull more than $100 billion a year out of the economy. The impact of this tax increase was just being felt when the February jobs survey was taken in the middle of the month.

The other big hit to the economy will be from the sequester, which will pull roughly $80 billion in federal spending out of the economy. The forecasts from the Congressional Budget Office and others show the sequester slowing growth by 0.5-0.6 percentage points. The economy has not even begun to feel the impact of these cuts, most of which will not start to effect until April.

In short, we have an economy that had been growing at a not very healthy pace through the second half of 2012 that is virtually certain to be slowed by contractionary fiscal policy through the rest of 2013. Unless there is a rapid reversal of policy, the 7.7 percent unemployment rate is likely to represent a low that we may not see again for some time. While the economy is not likely to fall into a recession and send the unemployment rate soaring, the economy is not growing fast enough to meet the need for jobs from a growing labor force. As a result unemployment will be going in the wrong direction for the rest of the year.

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy and False Profits: Recoverying From the Bubble Economy.

This article originally appeared on The Guardian.

 

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.

More articles by:

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

December 07, 2016
Michael Schwalbe
What We Talk About When We Talk About Class
Karl Grossman
The Next Frontier: Trump and Space Weapons
Kenneth Surin
On Being Caught Speeding in Rural America
Chris Floyd
In Like Flynn: Blowback for Filth-Peddling Fascists
Serge Halimi
Trump, the Know-Nothing Victor
Paul DeRienzo
Flynn Flam: Neocon Ex-General to Be Trump’s National Security Advisor
Binoy Kampmark
Troubled Waters: Trump, Taiwan and Beijing
Tom Clifford
Trump and China: a Note From Beijing
Arnold August
Fidel’s Legacy to the World on Theory and Practice
Dave Lindorff
Is Trump’s Idea To Fix a ‘Rigged System’ by Appointing Crooks Who’ve Played It?
John Kirk
Cuba after Fidel: Interview with Professor John Kirk
Jess Guh
Repeal of Affordable Care Act is Politics Playing with the Wellbeing of Americans
Eric Sommer
Team Trump: a Government of Generals and Billionaires
Lawrence Davidson
U.S. Reactions to the Death of Fidel Castro
John Garvey - Noel Ignatiev
Abolitionism: a Study Guide
Clancy Sigal
Caution: Conspiracy Theory Ahead!
December 06, 2016
Anthony DiMaggio
Post-Fact Politics: Reviewing the History of Fake News and Propaganda
Richard Moser
Standing Rock: Challenge to the Establishment, School for the Social Movements
Behrooz Ghamari Tabrizi
Warmongering 99 – Common Sense 0: the Senate’s Unanimous Renewable of Iran Sanctions Act
Norman Solomon
Media Complicity is Key to Blacklisting Websites
Michael J. Sainato
Elizabeth Warren’s Shameful Exploitation of Standing Rock Victory
David Rosen
State Power and Terror: From Wounded Knee to Standing Rock
Kim Ives
Deconstructing Another Right-Wing Victory in Haiti
Nile Bowie
South Korea’s Presidency On A Knife-Edge
Mateo Pimentel
Some Notes and a Song for Standing Rock
CJ Hopkins
Manufacturing Normality
Bill Fletcher Jr – Bob Wing
Fighting Back Against the White Revolt of 2016
Peter Lee
Is America Ready for a War on White Privilege?
Pepe Escobar
The Rules of the (Trump) Game
W. T. Whitney
No Peace Yet in Colombia Despite War’s End
Mark Weisbrot
Castro Was Right About US Policy in Latin America
David Swanson
New Rogue Anti-Russia Committee Created in “Intelligence” Act
George Ochenski
Forests of the Future: Local or National Control?
December 05, 2016
Bill Martin
Stalingrad at Standing Rock?
Mark A. Lause
Recounting a Presidential Election: the Backstory
Mel Goodman
Mad Dog Mattis and Trump’s “Seven Days in May”
Matthew Hannah
Standing Rock and the Ideology of Oppressors: Conversations with a Morton County Commissioner
Kevin Zeese - Margaret Flowers
#NoDAPL Scores Major Victory: No Final Permit For Pipeline
Fran Shor
The End of the Indispensable Nation
Michael Yates
Vietnam: the War That Won’t Go Away
Michael Uhl
Notes on a Trip to Cuba
Robert Hunziker
Huge Antarctica Glacier in Serious Trouble
John Steppling
Screen Life
David Macaray
Trump vs. America’s Labor Unions
Yoav Litvin
Break Free and Lead, or Resign: a Letter to Bernie Sanders
FacebookTwitterGoogle+RedditEmail