What is an economic recovery? Are we actually experiencing one? For most Americans, the economy and the labor market are synonymous – a healthy economy is one that creates jobs. And when journalists sit down to report the monthly jobs reports, that’s the question they try to answer.
But do they answer it? We learned Aug. 2 that the economy produced 162,000 net new jobs in July. And the unemployment rate has also come down gradually (if not steadily) to 7.4 percent since it reached its peak of 10 percent in October 2009.
But the focus on these numbers leaves the layman at a loss, or even misleads him – and it is the layman, not the labor market expert, who reads the news coverage.
The problem with the job topline numbers that get all of the attention each month is that they obscure things we need to understand to grasp the full picture. The first is that job creation doesn’t happen in a vacuum – it has to keep up with population growth.
It has barely done so over the last few years (as the accompanying chart shows), and we’re not closer to a return to previous levels.
A related problem with the other headline number – the unemployment rate – is that most or all of its decrease over the last few years is attributable to workforce attrition. As long as people keep giving up on finding work, it keeps going down.
One stat that is routinely ignored but perhaps more helpful is in the current climate is the employment-population ratio, which the Labor Department also publishes each month. You get this number by dividing the number of employed by the working-age population.
Obviously, this number took a huge hit amid the 2008 financial crisis (as the chart shows). But that was a long time ago. The more relevant question, now that we’re supposedly in a recovery, is what this ratio has been doing during the last four years. And as the accompanying chart shows, the answer is basically nothing.
When we talk about a “recovery,” we’re generally referring to a restoration of things to a previous condition. That isn’t happening in the job market. It hasn’t even started. For nearly five years now, we have been stuck on a historic employment low not seen since 1983 (and even then only for a couple of months), when Paul Volcker’s Fed was furiously battling inflation with sky-high interest rates.
This time, there is no fight against inflation and interest rates are near zero. Yet here we are, stuck at employment levels similar to when women hadn’t fully entered the workplace.
The White House and a few particularly sanguine liberal pundits conclude from this that President Obama must have saved us from something even worse. As Obama has suggested in the past, he’s always this close to turning the whole economy around, and then something bad happens.
The media seem to settle for a more plausible but unsatisfying conclusion: It’s fate. Things are bad, and hopefully they’ll get better.
The third alternative is the one people need to start taking more seriously. After four years of stagnation in the labor market and eight Obama “pivots” toward jobs, people of all political stripes should ask themselves seriously whether maybe the efforts of the last five years have been a total waste of time or even counterproductive.
That includes the Bush-Obama auto bailout, both presidents’ stimulus packages (of 2007 and 2009) – and yes, Obamacare, which, as the anecdotal evidence suggests, is prompting not only businesses but also public universities and state and municipal governments to cut employee hours and avoid additional hiring.
How many times can people be fooled? If these numbers can’t prompt a serious and unfavorable reevaluation of Obama’s tenure, then it’s hard to imagine what can.
