Pethokoukis

To praise the February jobs report is to embrace the New Normal economy

Credit: Obama White House; AEI

Credit: Obama White House; AEI

The headline numbers show a decent month for the US labor market in February. Nonfarm payrolls rose by 236,000 last month (246,000 in the private sector), the Labor Department said, beating economist expectations of 160,000. And the jobless rate fell to 7.7%, the lowest since December 2008, from 7.9% in January.

Now here’s some of what those headline numbers miss:

1. In January 2009, Team Obama economists predicted that the unemployment rate by 2013 would be 5.1% (and the economy would be booming at 4% annual growth). Heck, even without the stimulus, they thought the jobless rate would be down to 5.5%. That’s a big miss.

2. The labor force participation rate fell again as potential workers stopped looking for work. If the LFP rate was just where it was a year ago, in February 2012, the official unemployment rate would 8.3%. And if the LFP rate was where it was in January 2009, the unemployment rate would be 10.8%. Does the the aging of the US workforce make that 2009 number less relevant? Probably. But have demographics changed that radically over the past 12 months? Doubtful.

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3. The February U-6 number, the broadest measure of unemployment and underemployment, was down a tick to 14.3%. This probably gives a better feel for the real state of the labor market.

4. During the past three months, the economy has added an average of 191,000 jobs. At that pace, according to the Jobs Gap calculator from the Hamilton Project, it would take 101 months to return to pre-Great Recession employment levels while also absorbing the people who enter the labor force each month. Oh, and that calculation assumes no recessions between now and late 2021.

5. The share of the unemployed out of work for 27 weeks or longer increased to 40.2% from 38.1% in January.

6. The employment-population ratio is exactly where it was a year ago, at an almost rock-bottom 58.6%.

030813ep

The bottom line here is that the US labor market is treading water at best, with the falling labor force participation rate number hiding that sorry reality. To get excited about these jobs numbers really is to embrace the slow-growth New Normal reality. The economy continues to grow too slowly to really crank up the American Job Machine. Boosting growth in smart, supply-side way should be the top priority of the White House and Congress.

36 thoughts on “To praise the February jobs report is to embrace the New Normal economy

  1. 4% less of the population is working today than ten years ago. Irrespective of why this is, it’s pretty hard to have a vibrant economy when the ratio of producers to consumers is falling.

    • These are profoundly disturbing conclusions, which make sense. However, this is not the new norm. This is the result of a completely incompetent and arrogant president following the complete destruction of our credit markets by Wallstreet. America will recover, it will just take few more years.

  2. The question is this: If this ‘new normal’ stays normal, will the grandchildren of todays children be richer or poorer?

    They will be impoverished.

    • Nonsense. This “new normal” has been the norm in Western Europe for a long time. They are not impoverished or poorer than their grandparents. They are simply worse off than if their governments had pursued pro-growth policies.

      • you cannot generalize about Europe. The differences between N and S are massive, with the under 30′s with infinitely inferior prospects than their parents had at the same stage. Do you really want to accept the equivalent in the US? I doubt it.

        • It does not matter if you or I want to accept it, it only matters if the schools and media can keep cranking out enough “Low Information Voters” who gladly will. Much like Southern Europe, whenever anyone tries to reform it, riots, then riots to complain about other countries not bailing their debts out again. The thing about the US is, there is no one big enough to bail us out, and when our currency, the global reserve currency, finally goes into Weimar Republic meltdown mode, the bad stuff will happen very quickly.

  3. 1. In January 2009, Team Obama economists predicted that the unemployment rate by 2013 would be 5.1% (and the economy would be booming at 4% annual growth). Heck, even without the stimulus, they thought the jobless rate would be down to 5.5%. That’s a big miss.

    In January 2009, the CBO economists predicted that the unemployment rate by 2013 would be 6% and the economy would be booming at 4.2% annual growth. That’s a big miss.

    In January 2009, the Fed economists predicted that the unemployment rate in the long run (as it only projected two years forward) would be 4.5%- 5.5% and the economy would be booming at 2.4%-3.0%% annual growth. That’s a big miss.

    So Jimmy P., is your point that the OMB, CBO and Fed blew it? Congrats, all three did. How did you do? ROTFLMFAO

      • Oh, an afterthought. Please remind me of that goofball economist on labor flows that you quoted contemporaneously with senile Jack Welch frothing at the mouth about the Employment Situation Summary just prior to the presidential election.

        Are you gonna hang on and continue to quote him? Or did he bite the dust in your paper rolodex? I’d link to it, just to embarass your skill at hiding behind the prognostications of others, except there is no useful search function on the AEI blogs.

        • Califa bables: “Let’s start with money. The M2 measure of money is arguably the best (and it’s my long-time favorite): it is published weekly with only a minor lag, it’s subject to only minor revisions, its definition hasn’t changed materially over the years, and it’s displayed the most stable relationship to nominal GDP over long periods of any measure of money”…

          Ahhh, Califa has ‘quantitative easing‘ unicorns living on his planet too…

          Good one marmico

  4. This BLS jobs report is simply BS. The true number of jobs created was a still-failing 100k. That’s according to TrimTabs, using actual data from the Treasury dept. which daily reports jobs, payrolls, and withholding taxes. The BLS uses surveys and guesswork and frequently makes massive revisions.

    http://trimtabs.com/blog/2013/03/06/trimtabs-reports-u-s-economy-adds-100000-jobs-in-february/

    To see how BLS and TrimTabs compare Jan 2010 to Dec 2012, and the wild variations in BLS revisions:

    http://trimtabs.com/blog/wp-content/uploads/2013/TrimTabs_VS_BLS.pdf

  5. The BLS uses surveys and guesswork and frequently makes massive revisions.

    Could you kindly link me to the TrimTabs revisions? After all, TrimTabs is employing guesswork (algorithm). Thank you.

  6. If Romney had these jobs numbers this article would instead say,a fantastic jobs number proof that pro growth supply side reforms work much better than that failed socialist Obamanomics tragedy.The supply side thirty year failed experiment has reached the end of the line here in the US,it didn’t work hence the Americans are ready for a new deal.Obituary:Supply side economic experiment born (1981) died (nov 2012).Cause of death:(slow motion thirty year destruction of US middle class prosperity,wealth,health,and pride).Condolences can be sent to the next CPAC convention,in lieu of Ronald W Reagen.

    • I had done a few minutes of analysis to begin to refute Kevin’s ludicrous assertions, but I quickly realized that my effort would be all for naught. Anyone who has followed the slow erosion of American prosperity and believes it has anything to do with supply side economics rather than the creeping socialism of the last 30 years, and particularly the last 4-5years, either has no economics background or lacks the ability to reach rational conclusions from clear and unambiguous data. So I won’t waste my time.

        • A supply-side joke: Bubba was buying watermelons for $2 each in East Texas and selling them in Houston for $1.75 but not all was well at his bank. “What am I doing wrong?” he asked his loan officer. “Think about it for a minute and then you tell me,” the banker responded. “I know,” said Bubba. “I need as bigger truck.”

  7. One of Jimmy P’s “I’m just saying” posts from back in the day.

    http://money.usnews.com/money/blogs/capital-commerce/2009/03/16/barack-obamas-irrational-exuberance

    “Label it the “Irrational Pessimism” speech. In a peppery presentation to the Brookings Institution, White House economic adviser Lawrence Summers did his best to prove that Mr. Market has it all wrong, that the 25 percent drop in stocks since Election Day represents a) an irrational mispricing of risk, rather than b) an accurate assessment of an economy slipping into mini-depression, or even c) a reasoned vote of “no confidence” in Obamanomics. …

    None of this makes a compelling case for equities. Too bad. It’s often misunderstood, though surely not by Summers, just how important the stock market has become for the real economy today, not just retirement portfolios tomorrow. The long bull market enabled Americans to save less and spend more. A permanent shift away from stocks means Americans would need to shovel greater gobs of money into lower-yielding-but-safer assets and consume less. There’s also a political risk: The White House has highlighted another clear marker for how Americans (and GOP campaign ad meisters) should judge its policies. If portfolios stay sickly, impatient voters might wonder if was not Mr. Market but Mr. Obama who, in the end, had it all wrong.”

  8. Another bogus jobs report. I should know; I’ve been out of work for now two years and over the last two months I have noticed the dearth of communications jobs in D.C. (my specialty). Usually I can apply for about five or six a week, but I have only seen one or two that are at my level (11+ years). The D.C. economy is getting worse and there is no improvement for the rest of the nation.

    More political numbers manipulation courtesy of the BLS–and BHO.

  9. The future lies in practical trades.Auto mechanics,carpenters,electronic techs,(thats what I am),Air conditioner techs,welders,–That Liberal arts degree and finance degree is a ticket to poverty.Vocational skills will get you working.Things people need.

  10. Democrats have low expectations. They’ve accepted high unemployment for the past 4 years, and now they’re telling us its “normal”.
    Mitt Romney would NEVER accept that if he was President.

  11. Excellent commentary by my fellow Greek J. Pethokoukis. I am wondering how he came up with the two curves, with and without the Recovery Plan… I will read more and find out if nobody answers.

  12. I never get why people pull out that “unemployment with recovery plan/without recovery plan/actual” graph. Is the implication that the recovery plan made it worse?

    Of course the recovery plan didn’t make it worse. It was just a bad projection. Honestly!

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