Click amount to donate direct to CounterPunch
  • $25
  • $50
  • $100
  • $500
  • $other
  • use PayPal
Spring Fund Drive: Keep CounterPunch Afloat
CounterPunch is a lifeboat of sanity in today’s turbulent political seas. Please make a tax-deductible donation and help us continue to fight Trump and his enablers on both sides of the aisle. Every dollar counts!
FacebookTwitterGoogle+RedditEmail

The Bad News About Jobs

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.

 

More articles by:

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.

May 24, 2018
Gary Leupp
Art of the Dealbreaker: Trump’s Cancellation of the Summit with Kim
Jeff Warner – Victor Rothman
Why the Emerging Apartheid State in Israel-Palestine is Not Sustainable
Kenn Orphan
Life, the Sea and Big Oil
James Luchte
Europe Stares Into the Abyss, Confronting the American Occupant in the Room
Richard Hardigan
Palestinians’ Great March of Return: What You Need to Know
Howard Lisnoff
So Far: Fascism Lite
Matthew Vernon Whalan
Norman Finkelstein on Bernie Sanders, Gaza, and the Mainstream Treatment
Daniel Warner
J’accuse All Baby Boomers
Alfred W. McCoy
Beyond Golden Shower Diplomacy
Jonah Raskin
Rachel Kushner, Foe of Prisons, and Her New Novel, “The Mars Room”
George Wuerthner
Myths About Wildfires, Logging and Forests
Binoy Kampmark
Tom Wolfe the Parajournalist
Dean Baker
The Marx Ratio: Not Clear Karl Would be Happy
May 23, 2018
Nick Pemberton
Maduro’s Win: A Bright Spot in Dark Times
Ben Debney
A Faustian Bargain with the Climate Crisis
Deepak Tripathi
A Bloody Hot Summer in Gaza: Parallels With Sharpeville, Soweto and Jallianwala Bagh
Josh White
Strange Recollections of Old Labour
Farhang Jahanpour
Pompeo’s Outrageous Speech on Iran
CJ Hopkins
The Simulation of Democracy
Lawrence Davidson
In Our Age of State Crimes
Dave Lindorff
The Trump White House is a Chaotic Clown Car Filled with Bozos Who Think They’re Brilliant
Russell Mokhiber
The Corporate Domination of West Virginia
Ty Salandy
The British Royal Wedding, Empire and Colonialism
Laura Flanders
Life or Death to the FCC?
Gary Leupp
Dawn of an Era of Mutual Indignation?
Katalina Khoury
The Notion of Patriarchal White Supremacy Vs. Womanhood
Nicole Rosmarino
The Grassroots Environmental Activist of the Year: Christine Canaly
Caoimhghin Ó Croidheáin
“Michael Inside:” The Prison System in Ireland 
May 22, 2018
Stanley L. Cohen
Broken Dreams and Lost Lives: Israel, Gaza and the Hamas Card
Kathy Kelly
Scourging Yemen
Andrew Levine
November’s “Revolution” Will Not Be Televised
Ted Rall
#MeToo is a Cultural Workaround to a Legal Failure
Gary Leupp
Question for Discussion: Is Russia an Adversary Nation?
Binoy Kampmark
Unsettling the Summits: John Bolton’s Libya Solution
Doug Johnson
As Andrea Horwath Surges, Undecided Voters Threaten to Upend Doug Ford’s Hopes in Canada’s Most Populated Province
Kenneth Surin
Malaysia’s Surprising Election Results
Dana Cook
Canada’s ‘Superwoman’: Margot Kidder
Dean Baker
The Trade Deficit With China: Up Sharply, for Those Who Care
John Feffer
Playing Trump for Peace How the Korean Peninsula Could Become a Bright Spot in a World Gone Mad
Peter Gelderloos
Decades in Prison for Protesting Trump?
Thomas Knapp
Yes, Virginia, There is a Deep State
Andrew Stewart
What the Providence Teachers’ Union Needs for a Win
Jimmy Centeno
Mexico’s First Presidential Debate: All against One
May 21, 2018
Ron Jacobs
Gina Haspell: She’s Certainly Qualified for the Job
Uri Avnery
The Day of Shame
FacebookTwitterGoogle+RedditEmail