The Recovery Turns Five
The release of the June 2014 jobs numbers this morning marked the five-year anniversary of the official end of the recession (and start of the recovery) in June 2009. It was a strong report. A couple of thoughts:
- We added 288,000 jobs in June, bringing the second-quarter average growth rate to 272,000. This is strong job growth. The only sobering part is that we still have a gap in the labor market of 6.7 million jobs, and even if we saw June’s rate of job growth every month from here on out, we still wouldn’t get back to health in the labor market for another two and a half years.
- The unemployment rate dropped from 6.3 percent to 6.1 percent, and it was mostly for good reasons! Recall that the unemployment rate can drop for good reasons—a higher share of potential workers find jobs—or bad reasons—potential workers drop out of, or never enter, the labor force because job opportunities are so weak. Most (though not all) of the improvement in the unemployment rate since its peak of 10 percent in the fall of 2009 has been for bad reasons. But in June, the drop in the unemployment rate was largely of the good kind. The labor force participation rate held steady, and the share of the age 16+ population with a job increased by one-tenth of a percent. Furthermore, the share of the “prime-age” population with a job (my favorite measure of labor market health), increased by three-tenths of a percent, restoring it to its March level following two months of declines.
- The issue of “missing workers”—potential workers who, because of weak job opportunities, are neither employed nor actively seeking a job—still looms large in today’s labor market. I estimate that there are roughly 6 million such workers, and if they were in the labor force looking for work, the unemployment rate would be 9.6 percent instead of 6.1 percent.
- The public sector added 26,000 jobs in June, good news given our gap in public sector jobs of roughly 1.5 million. The private sector began adding jobs in the spring of 2010, but the public sector continued shedding jobs until last July. The number of public sector jobs had stayed roughly flat since then, so June’s growth is important if it signals the public sector is beginning to dig out of the hole. However, a point of caution: most of June’s public sector job growth occurred in local government education (largely teachers and other employees in public K-12 education). With the bad winter weather, many schools extended their school year, so there were likely more teachers on payroll in June than had been expected, which would have artificially boosted the numbers. The fact remains that the loss of public sector jobs has been an enormous drag on the current recovery that was not weighing on earlier recoveries.
- As has been the case since the long-term unemployment rate (the share of the labor force that is unemployed for 27 weeks or more) reached its peak in the spring of 2010, most of the drop in the unemployment rate in June was due to a decline in the long-term unemployed. The fact that the long-term unemployment rate has declined more than the short-term unemployment rate over the last four years underscores that today’s long-term unemployment does not appear to be “structural.” However, long-term unemployment remains extremely high, with almost one-third (32.8 percent) of unemployed workers unemployed long-term. For more on the ongoing long-term unemployment crisis, see this brief commentary.
- The number of workers who are working part-time but want full-time jobs rose by 275,000 in June. This important measure of slack in the labor market has made very slow improvement since its peak in 2010 and remains far above pre-recession levels. In 2007, 4.4 million people were “involuntarily” part-time. That shot up to 9.2 million in the spring of 2010, and has since only declined to 7.5 million. Two-thirds of the net new workers in June were people working part-time who want full-time jobs.
- Average hourly wages of private sector workers and of production/nonsupervisory both increased slightly in June. The chart shows year-over-year growth in hourly wages for both groups. Both are seeing growth rates far below what they were seeing before the recession started, and the “all private sector employees” series has seen no increase whatsoever in more than three years. In recent months, many commentators have raised concerns that our labor market may be tightening enough to be causing excessive wage growth that would trigger inflation. There is no sign of that here. Instead, today’s jobs report shows there remains a tremendous amount of slack in the labor market, which shifts bargaining power away from workers and keeps wages low.