Yesterday’s monthly jobs report has fostered more than the usual amount of optimism that, five years after the current U.S. recovery technically began, that word can finally start to be used without humbling qualifiers or sarcasm-signaling quotation marks.
I’m not doubting that the evidence from the June figures impresses – the considerably better-than-expected 288,000 total nonfarm employment gain, the revisions up for April (to more than 300,000), and May, the consequent rise of the monthly job gains’ three month moving average to 272,000, the fall of the unemployment rate to 6.1 percent.
At the same time, even more exciting monthly net new job creation has been registered before since the recession ended in the middle of 2009 – for example, 360,000 in January, 2012 and 304,000 in April, 2011. (May, 2010 saw a seemingly too good to be true 516,000 jump in U.S. employment that actually was too good to be true – it resulted mainly from the temporary hiring of workers for Census-taking.)
More important, some of the details of the June jobs report cast real doubt on whether the latest U.S. employment developments are pointing to genuine healing for the economy. The Labor Force Participation Rate and the employment-to-population ratio – which measure how much of the nation’s adult population is actually employed – remain at multi-decade lows . Meanwhile, the share of Americans working part-time because employers are giving them no choice actually rose in June to 7.5 million. That’s lower than the 9 million peak achieved in 2009 but much higher than the 4.4 million level in 2007, the last year before the Great Recession hit.
Moreover, hourly wages in the private sector adjusted for inflation resumed falling on a month-on-month and year-on-year in May (the latest such detailed statistics available). Before May, they were continuing their recovery-long pattern of going nowhere – from depressed levels.
Belief that better monthly jobs numbers will put the economy on solid ground springs from the commonsensical observation that the more Americans who are gainfully employed, the more money they’ll have in their pockets to spend, and the more they’ll be able to borrow (hopefully in a responsible way this time). This spending, in turn, will spur businesses to turn out more products and services to meet new demand, which will spur more hiring if it keeps up long enough, and even ultimately drive up wages if workers become scarce enough.
The logic makes perfect sense – until you start wondering. Can a durable virtuous cycle be created when near-record numbers of Americans aren’t working at all? When historically high levels are stuck in low-paid part-time jobs with no benefits? When the typical worker’s wage has been barely keeping up with living costs and may now have started falling behind again?
I can think of several reasons for answering “Yes.” If Washington steps up borrowing from the future to finance stepped up handouts in the form of, say, re-extended unemployment insurance or more generous Obama-care subsidies or more types of mortgage relief or lower interest rates on student loans. If banks start lending once again to borrowers who can’t afford their desires, either voluntarily, or due to government pressure. Maybe even if government succeeds in forcing pay up with a higher minimum wage (though the raises discussed don’t seem to be macroeconomic game changers).
I’m not against handouts, especially for folks in need through no fault of their own – and heaven knows there are enough of those. But let’s not mislabel them as sources of sustainable economic growth. So until the United States rediscovers the ability to create many more full-time, family wage jobs than at present, count me as a recovery skeptic.