The Bureau of Labor Statistics released the monthly U.S. employment report last week. While the report looks strong on the surface, there is continued weakness in the labor market.
The headline numbers of 288,000 net jobs added was impressive. The drop in the unemployment rate to 6.3 percent from 6.7 percent signals strength in the labor market, but it is not a good indicator because of the large decline in the labor force (see figure below). Average hourly earnings increased to $24.31 per hour-up 1.9 percent over the last year compared with 1.5 percent reported inflation.
Despite these relatively positive signals, the following challenges remain:
- Long-term unemployed (those jobless for 27 weeks or more) dropped by 287,000 to 3.5 million-accounting for 35 percent of the 9.8 million total unemployed.
- Over the past 12 months, the number of long-term unemployed has decreased by 908,000-partially due to those searching more for a job or dropping out of the labor force after the expiration of extended unemployment benefits in January.
- Civilian labor force declined by 806,000 last month, meaning that the unemployment rate dropped primarily from the almost three times more people who stopped searching for a job than those who were hired.
- With this decline, the percentage of the population employed or looking for work fell to 62.8 percent-remains substantially lower than before the last recession.
- Some argue this is from baby boomers exiting the labor force. There is some truth to this as approximately 10,000 baby boomers retire every day. However, the Mercatus Center recently released an analysis showing that those 55-years-old and older have entered the labor force since 2007 and those who dropped out where under 55. Much of this has to do with the decline in housing and stock wealth during the last recession and continued economic uncertainty from terrible fiscal policies out of D.C. and monetary policies by the Federal Reserve.
- Despite the drop in the unemployment rate, the percentage of the population who are employed (my preferred measure) remained at 58.9 percent and has hovered around this thirty-five year low for the last five years.
- The more stable working group between the ages of 25 to 54 had their labor-force participation rate decline from 81.2 percent to 80.8% in March and their employment-population ratio decreased to 76.5%, both are the lowest in decades. These rates signal why many Americans feel depressed about the labor market.
- Part-time employment for economic reasons did not change much at 7.5 million. This remains historically high and raises concern over the state of the labor market.
Despite a solid report nominally, many factors are troubling. By choosing sound, conservative fiscal policies that get government out of the way of the private sector and by reducing market uncertainty through rules-based monetary policy, all Americans can take part in this “recovery.”