Bad U.S. Economic News: Job Growth Stalls While Unemployment Rises
The American jobs engine hit stall speed in May, with the economy adding just 69,000 new jobs while the unemployment rate climbed to 8.2 percent.
As another summertime swoon looms, the Bureau of Labor Statistics reported that job creation missed economist estimates for 158,000 new positions and the jobless rate rose for the first time in nearly a year.
Labor force participation remains near 30-year lows though incrementally better than last month, rising to 63.8 percent.
The unemployment rate that counts discouraged workers rose as well, swelling to 14.8 percent form 14.5 percent in April.
Long-term unemployment also took a sharp upturn, with the number of those out of work for 27 weeks or more jumping from 5.1 million to 5.4 million. The average duration of unemployment moved from 39.1 weeks to 39.7 weeks.
“It’s painfully obvious the economic recovery in the U.S. isn’t just slowing down, it’s pulling up the emergency brake. And, lack of job creation isn’t the only critical concern. Wages/Income is sharply lower,” said Todd Schoenberger, managing principal The BlackBay Group in New York.
“For those lucky enough to have a job, their spending power is sliding when accounting for inflation. The markets will respond negatively to this report,” he added. Markets reacted immediately to the numbers.
The unemployment rate rose slightly to 8.2% in May, holding above 8% for the 40th straight month, the Labor Department reported Friday. But actual employment rates of core working age Americans suggests the true jobs situation is even worse.
From mid-1987 until the Great Recession, the employment-to-population ratio of 25-54-year-olds usually ranged from 78.5% to 80%. It never fell below 78.2% even during the 1990-1991 and 2001 slumps.
But now, nearly three years after the recession ended in June 2009, that ratio stands at just 75.7%.
“Right now this is probably a better measure than the unemployment rate,” said James Sherk, senior policy analyst in labor economics at the conservative Heritage Foundation. “There are so many people dropping out of the job market and the unemployment rate, bad as it is, doesn’t pick that up. The ratio gives a better idea of employment opportunities.”
Added Heidi Shierholz, an economist at the liberal Economic Policy Institute, “Looking at this ratio sidesteps a lot of structural issues, like baby-boomers retiring. You are looking at prime-age workers and it gives you a better sense of the weakness in our current job market.”
The jobless rate can be misleading because it only includes the share of people looking for work but don’t have a job. Those not trying to get a job aren’t counted as unemployed. And the labor force participation rate has fallen to its lowest level in decades.
Will America’s political class come to America’s rescue?
Don’t hold your breath (unless you want to turn blue).
America’s political process will not do much to ameliorate matters. Republicans in Congress, trying to maintain the furor of the Tea Party, and presidential challenger Mitt Romney, have a vested electoral interest in portraying the United States economy as broken by the policies of President Obama. That, combined with the looming “fiscal cliff” at the end of the year—when both parties in Congress will have to renegotiate the tax cuts and future spending that they failed to compromise on during the fateful downgrade summer of 201—offers little hope going forward.
And yet, while this vortex of negatively reinforcing views speaks volumes about the dysfunctional nature of politics and finance, that is not the only reality. Clearly, there is some degree of slowdown in global economic activity underway, as companies, countries, and individuals become cautious in the face of the fear and some significant unresolved structural issues in Europe, China, and the U.S. That is not the same as collapse, and the American labor market demonstrates that.
In fact, the labor picture in America has been shifting for decades, and recent dislocations have only stripped away the last vestige of collective denial. Some still maintain that current employment problems are a product of government policy and can be solved by better policies. But that is a faith-based view. What is evident in fact is that there is a dislocation many years in the making and many years in the healing, aggravated by poor public policy. There is a mismatch between skills and jobs, and between needs and wants. College graduates remain far better placed in this economic system, even with struggles in the first years after graduation. The unemployment rate for those with a bachelor’s degree dipped in May, according to this report, to 3.9 percent, which in truth is close to “full employment” given natural ebbs and flows.
Lastly, there is the problem of numbers and averages. Systemically, there is an 8.2 percent unemployment rate. There is a severely low “labor force participation rate” of 63.8 percent (though that did increase in May), which means that many people are so discouraged they aren’t even looking for jobs. And there are tens of millions of people underemployed or employed with a wage that pays them too little to rise out of poverty.
Add to that the ongoing, worsening economic crisis in Europe – and it could be that the coming months will bring more bad news…