This is just a brief post-mortem on this morning’s monthly employment situation report, for those who did not have the opportunity to spend time with it.
As you probably know, the employment report is based on two separate surveys, one of employers and one of households. The employer survey is generally thought to be the more reliable, with the footnote that it has a significant inevitable weak spot in the impossibility of adding newly created firms to, and dropping dying firms from, the sample in real time. The household survey shows greater variability from month to month because of the difficulty some workaday citizens have with picking up the nuances of the concepts, not to mention the refusal of some to participate.
This month’s employer survey showed mediocre growth – 162,000 new jobs. That is not enough to rebuild employment very much from the enormous job losses of the financial crisis, after taking into account the growth of the potential labor force (about 100,000 to 120,000 per month) because of the simple expansion of the adult population. If you were hoping for a breakout number, this isn’t it.
The industry categorization of job growth was not terribly encouraging, either. More than half of the new jobs came in food services and drinking places, and in retail trade. I don’t want to overstate this complaint. Job growth is better than the alternative, and jobs should not be downgraded reflexively on the basis of their industrial classification. But having half of new job creation in these categories would be more satisfying if the overall new-job number had been robust.
One perspective on the labor market, and on the economy generally, is that the weakness in so many economies around the world (including ours) leads to reduced demand for goods and for highly technical services, which are the industry categories that tend to provide the best-paying jobs. If we had robust overall economic and job growth, the retail and dining-and-drinking sectors would face more competition in the market for labor, and would have to pay more, benefitting everyone. We don’t need a campaign against “services” and those firms that provide them, and we don’t need a campaign for gravity-defying higher wages without demand for labor. We need economic growth.
In the household survey, the unemployment rate fell by 0.2 percentage points, from 7.6 percent to 7.4 percent. Increasingly sophisticated public opinion puts much less stock (pardon the pun) in the unemployment rate than it did, say, two or three decades ago. More people now understand that the unemployment ratio has a numerator and a denominator, that both matter, and that shifts in one or the other can yield a misleading overall change. In this case, the household survey had employment rising, unemployment falling by a little more, but the size of the labor force declining a bit. If the economy had been improving significantly, we would have expected some of the large number of discouraged job losers to re-enter the labor market. Instead, following the pattern of recent months, we have at best tepid interest in the labor market. Again, the need – easy to say, but more difficult to legislate than some would admit – is greater overall economic growth.
Wall Street often needs to decide whether good economic news is bad news (because it portends government macroeconomic restraint), or bad economic news is good news (because it will motivate government macroeconomic stimulus). This time, Wall Street will have to interpret mediocre economic news. May it choose wisely.
So the trend is that the trend continues. Move along, folks, there’s nothing going on here. (Sigh.)