Yes, the Employment Report Was Decent. But No, The Labor Market Isn’t Strong.

Yes, this morning’s jobs report had some welcome news. Payroll employment was up 280,000 jobs, slightly above the trend of the previous six months. But the recovery is far from complete: there is still a three million job shortfall in the economy today.

The recent trends in job growth predict a slow march back to full recovery. If we continued to add 280,000 jobs a month into the future, we wouldn’t fill the jobs gap until August 2016—more than a year away. Over the last six months, average job growth was 236,000. If we continued to add jobs at that pace, the gap wouldn’t close until the end of 2016. The three month average of 207,000 jobs (much slower because of the poor March report) moves full recovery even farther into the future—at that pace, we wouldn’t return to pre-recession labor market health until April 2017.

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Furthermore, it’s important to remember that the 2007 labor market is still a low bar and that recovery is not just about jobs. Nominal wage growth continues to be far below target. Yes, 2.3 percent wage growth is an improvement, but it’s nowhere near strong enough to call for rate hikes. The Fed should not feel comfortable raising rates in September—in fact, they shouldn’t even begin to think about having a conversation about raising rates until 2016.

  • benleet

    3 million jobs short of recovery ? — that seems too little. I would place it at 5 million. The Employment to Population ratio is still 4% below December 2006, and 4% is 10 million workers. And it’s 5% below 2000 levels, 12.5 million workers. 1984 and 1978 were the last times when E/P was this low. And labor participation not since 1978 at this low rate. Since I do this periodically, I know to look at, which states that 13.1% is the unemployment level, 21.5 million. So there is some difference of assessment among very educated experts. I also look to see if Dan Alpert at Economonitor writes anything about the labor/wage market. As I calculate, the CBO stated that the average income per household in 2011 was $93,900, among about 117 million households. Doing some multiplication and division, that comes to $73,000 for each worker’s contribution to national income, including part-timers and unemployed. Half the workers earn less than 8% of the national income if I add the collective wage income of the lowest 50% wage earners as reported by the Social Security Administration. Even the EPI reports that the average household income would have been $18,000 higher, among the 20 to 80 percentile of income, and that is much more than a 2.3% increase in hourly wages. It sounds like two stories are told when I compare the EPI reports. I sense that economists do not have a grasp about what is excessive savings for a nation. The surplus seems to go to waste in this nation, as the very richest squander it on the financial assets market, with no productive outcome, and very negative results for very low income families. This month CPEG published a newsletter with a long quote from Eduardo Porter who writes for the NYTimes, where he cites some negative conditions in the U.S. It’s sad. Thanks for the great work, to all at the EPI.