The New Jobs Numbers Are Great. The Whole Picture Isn't, Yet.

by Jonathan Cohn | May 2, 2014

The new jobs report is out and the headlines about what happened last month will look great. Unemployment came down! Job creation was higher than expected! But the details within the report paint a more complicated picture—with some real reason for optimism, but also some real reason for skepticism, plus all the ambiguity and uncertainty that comes anytime you look at a one-month snapshot of the economy.

Here are four quick takeaways, in no particular order:

1. On the whole, the economy is creating more jobs. The official finding from the Bureau of Labor Statistics is that the economy created 288,000 jobs last month. Job creation in February and March was also slightly higher than original estimates suggested, according to the Bureau, which means the economy has been creating more than 200,000 jobs a month for three months in a row. 

Calculations by economist Jonathan Wright, for the Brookings Institution, suggest even those numbers may slightly understate the recent progress because they fail to adjust adequately for seasonal patterns.

The economy still isn’t recovering as quickly as it has after past recessions, but the new data confirms, once again, that it is recovering. “The payroll numbers look like there’s been a full recovery from the slow payroll gains in early winter,” Gary Burtless, the labor economist at Brookings, says via e-mail. “In fact, abstracting from the weak numbers in December and January, I would say the employer payroll numbers look like it’s been a mighty stable (albeit disappointingly slow) recovery from the post-war era’s worst job market downturn.”

2. But fewer people are looking for work. Labor force participation fell by 806,000, following three months in which the rate had increased by smaller amounts. It’s now down to 62.8 percent, which is what it was in December. Neil Irwin at The Upshot calls this part of the report’s “soft underbelly.”

Here, especially, it’s hard to know how much the April results are indicative of a trend. These particular numbers jump around an awful lot. But Burtless says there's reason for concern:

There has been little if any change in the number of Americans in the labor force—employed or unemployed—over the past 12 months.  Yet we know the number of Americans in age groups where we’d expect them to participate has increased over the past year.  This indicates (to me) a discouraging indicator about the weakness in the job market.  A lot of folks age 16-55 are neither working nor looking for work, even though (based on their behavior in 2005-2007) we expect that they SHOULD be working or looking for work.

One issue to watch: Are people dropping out of the labor force because, absent unemployment benefits and the inducement to keep searching, they have simply given up? My colleague Danny Vinik has written about this and, potentially, it’d be a big problem.

3. Conservatives have won the argument on shrinking government workforces—and that’s probably not helping. The number of teachers in the workforce rose by 12,000, which is actually a refreshing change: As Danny has pointed out, the public education workforce fell by about 300,000 over the last four years. But the long-term story about the U.S. workforce remains what it’s been for a while: Governments have been shedding jobs, offsetting some of the jobs that the private sector is creating.

Here’s what it looks like graphically, via Matt Yglesias at Vox:

Public and private sector employment trends

Conservatives would cheer this result, arguing that smaller government makes it easier for businesses to prosper and hire new workers. But most center- and left- economists I know endorse the opposite view—that substantial reductions in the public sector workforce have, overall, had a negative impact on the economy over the last few years.

4. Some economists are pretty happy about this report, although they agree it's too soon to celebrate. “This was a strong month—very strong,” says Austan Goolsbee, the former Obama Administration economist who’s now back at the University of Chicago. “There is a lingering suspicion that some of that strength is the come back from the weather problems before but if we get a few more months like this, folks are going to be over the moon.”

Source URL: http://www.newrepublic.com//article/117625/april-jobs-report-unemployment-down-payrolls-participation-down