Has the job market healed?
A run of steady payroll gains suggests the worst is over. A dive into the data suggests otherwise.
Here's some good news. The unemployment rate held steady at 8.3% in February, while payrolls jumped 227,000. That puts the three-month average at 244,000. For job seekers, on a number of measures, the performance over the past few months has been the best of the recovery to date.
So that's it, right? Time to unfurl the "Mission Accomplished" banner, tell the Federal Reserve to withdraw the trillions in cheap money it's injected into the financial system like morphine, and ask your boss for that long-postponed raise? Well, not quite.
It's true that job gains are always positive. But there is plenty of evidence we've yet to shake the post-recession job market hangover. There are also reasons to believe that, as in 2010 and 2011, economic momentum is set to fade later in the year as temporary factors -- including unseasonably warm weather, inventory accumulation, and savings rate drawdowns -- start to drag on growth.
Let's talk weather. Bank of America Merrill Lynch notes that the average nationwide temperature in February was 38.3 F, 5 degrees above last year's and 4 degrees above the average of the past five years. Averaging December through February, we just experienced the warmest winter since 1999-2000.
During winter, the government adjusts employment data by adding jobs to offset people stuck at home because of snow and ice. Over the past five years, roughly 485,000 people couldn't work in February because of weather. This month, this number was just 178,000.
Basically, the payroll number was artificially boosted by about 307,000 jobs.
Moreover, while jobs are jobs, the quality and the remuneration of those jobs are arguably more important. On this metric, the situation remains weak. Average hourly earnings were up 0.1% for the fourth month in a row. For the year, earnings were up 1.9% -- continuing a trend of 1.8% to 2% growth seen over the past two years. According to Philippa Dunne of the Liscio Report, this suggests that low-wage jobs are playing a disproportionately large role.
Given that consumer price inflation has averaged 3.1% over the past year, even people who can find jobs are simply falling behind the rising cost of living. In fact, real disposable income has fallen in two of the past three months. This has never happened in a nonrecession environment before.
No wonder the 2011 holiday shopping season was driven by withdrawals from savings and rising credit card usage. Obviously, this isn't sustainable.
So it shouldn't come as a great surprise that, despite the employment growth of the past few months, the job gains aren't translating into increased consumer spending -- the vector by which all these jobs gains are supposed to result in higher economic growth. Real consumer spending has been flat over the last three months as shown in the chart above.
As a result, the team at Capital Economics believes the spending component of GDP (along with Friday's disappointing rise in the trade deficit because of high oil prices) could pull first-quarter growth down toward 1%. Wall Street economists are frantically cutting their growth forecasts in response.
This is below the economy's "stall speed" -- or the rate of growth that's needed to keep the unemployment rate from rising in response to a growing population. Not only that, but a dramatic fall in labor productivity and rising unit labor costs is making each new worker hired less profitable for employers. Both of these things will be a drag on the job market going forward.
Just look at what Bank of America Merrill Lynch economist Neil Dutta told his clients this morning:
"In other words, productivity is slowing sharply as companies have squeezed every drop of output possible out of their current workforce. Today’s data implies that corporate profit margins are coming under pressure. Unless economic growth begins to accelerate, it is difficult to see how this rate of employment growth can be sustained."
One more thing. It's important to keep all of this in perspective. My preferred measure is the percentage of the population in full-time employment -- you know, the kind of jobs that people really want. Jobs with benefits, a modicum of security and maybe even a retirement plan. Jobs that encourage spending on big ticket items like new cars and new homes.
By that measure, we remain near recessionary lows and are at levels not seen since the early 1980s. And we are more than 10.6 million full-time jobs below our pre-recession peak despite the fact the working population has grown by 10.4 million workers.
Total full-time job deficit: 21 million. We need more and better jobs.
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Tell all this BS to the 56 people I have laid off right now ask them how well the job market is doing. I bet if you go out on the street and ask you will get a whole different picture then you are getting from the government yes men and gals trying real hard to get their man re-elected.
Ponder this....The FED has interest rates at zero, trillions of fiscal stimulus have been spent...and this is the best we can do?
Interest rates must eventually rise and stimulus can't go on forever
A hard rain is going to fall.
The Job market stinks around here still. Everybody says go back to school, but how are you supposed to afford to do that if you can't find a job to pay for it in the first place?
Over the past four years, the population of the U.S. has grown by 10 million. The workforce during that period shrank by 5 million. There are a record 46.6 million people on food stamps. To top all that we have grown the national debt by about $6 trillion.
If you're out of work you're not alone.
When people start cutting back on spending because gas reaches $4/gallon and then possibly $5/gallon, we may see a strong rise in unemployment as businesses will find it necessary to lay off large numbers of employees.
Congressman Palazzo of Mississippi mentions in one of his campaign adds the easing restrictions may help to improve employment. It kind of makes sense but the problem comes in determining which restrictions will be eased. The other problem is the increasing number of Free Trade Agreements that have been passed making it easier for corporations to send even more jobs overseas.
Our government will have us believe that as a result of FTAs, with the biggest FTA being NAFTA, that more jobs are created. Has anyone seen a significant job creation in their state as a result of any FTA being passed? I know in Mississippi, there has not been one and I would think that very few other states did either.
In President Obama's State of the Union speech, he boasted that 3.3 million jobs were created in 2010. What kind of jobs were created? McDonald's having a major hiring event would not be a big bragging point when it comes to job creation. Many of us have college degrees, some of us are working on advanced college degrees, and yet very few jobs are available that allow us to take advantage of our degrees. Not much bragging for someone with a college degree working as a cashier at McD's or a convenience store. Where were these jobs created? Not much to boast about job creation if it only occurs in a few states. I have asked my Congressman and Senator about the jobs that were created in 2010 and I have yet to get any answers from them. Has anyone asked their state representatives about job creation and gotten an answer that was understandable or made any sense?
ya, ya twit....8.3 % unemployed healed right up with nice min wage jobs
This is such a crock!! The true employment situation is that millions are under employed or just not trying anymore.
Lets see a study done on these individuals and get the true picture of just where we are.
For once, I have to commend MSN for writing an article that clearly shows all things are not fine and dandy. The employment numbers are pretty much a sham, but neither party has the guts to require the reporting agencies to report true unemployment numbers; just the way the government refuses to report the true inflation numbers.
I am sick and tired of spin doctors weaving a pretty sound bite for the ignorant masses to latch on to. We need someone who is not afraid to tell us the truth, and then not afraid to take the difficult steps to improve our situation.
Admittedly I don't quite get his weather argument. Is he saying that normally 485,000 people per month can't get to work in February because of weather or is that the total for the 5-year period?
His point about the quality of jobs is huge. It would be interesting to find out how many people took jobs that paid less than their unemployment compensation. When it runs out you have to find work no matter what it is.
This economy needs a jump start and the deficit spending of Bush and Obama clearly isn't the answer. We don't have a choice in my opinion- we've got to become an energy producer and exporter.
Many are off unemployment only to give up, go part-time or on disability welfare.
The numbers don't bear that out over time.
Well, I guess it depends on which numbers you use. Gallup puts the forced part-time unemployment rate near its highs over the last three years. since 2010. So, don't be so dismissive.
Plus, get a load of their unemployment rate rising steadily since late last year from 8.4% in November to 9.1% now.
They put the underemployment rate at 19.1%.
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