So the new jobs report has the unemployment rate below 9 percent for the first time in two years, with 220,000 new private-sector jobs having been created (since 30,000 public-sector positions have been cut, the overall number is around 190,000). That sounds good, and there are certainly positive details within the report — especially the fact that private-sector job growth was revised upward by 18,000 from last month’s original estimate of 50K. Two consecutive up months with a revision is a strong suggestion of overall improvement.
But as is now sadly usual, the overall employment number makes no sense. It’s down nearly 10 percent from November’s 9.8 percent, which is amazing — but over the course of those months, only 300,000 new jobs have been created, which shouldn’t have been enough on its own to shrink the employment rate at all. Indeed, as Jim Pethokoukis, the great economics columnist for Reuters (and COMMENTARY contributor), mentioned on Twitter this morning: “The labor force participation rate went nowhere — unchanged. So we are still dealing with a shrunken jobs market.” In other words, the percentage of able-bodied Americans of working age who are actually working did not improve at all.
There are two possible explanations. The first is that the unemployment rate comes from one survey and the jobs-creation rate comes from another, and they’re not in alignment. Of course, the fact that they’re not in alignment means that either one of them is untrustworthy or they both are, in which case we shouldn’t be discussing them at all (except that the markets study them carefully, and so they have an effect on the economy even if they’re garbage). Since the unemployment rate is determined through survey data — essentially, a poll, though a very large one — it is worrisome to note that yesterday, Gallup’s poll indicated an unemployment rate over 10 percent, which was a significant increase over its finding from the previous month.
The other explanation is that we are yet again showing the effects of long-term unemployment, with people simply dropping off the job map altogether. That shrinks the number of Americans the government survey says are out of work, because the number of Americans actively looking for work has declined. The pool shrinks, and so does the unemployment number. But in that case, except for allowing for some feel-good spin, that 8.9 percent number is meaningless — it does not capture the true unemployment picture, and politicians who believe it does are liable to make mistakes if they think the trend lines are uniformly positive.
Of course, if the economy is really growing, eventually the employment picture will improve, because American businesses will have more customers with more disposable income and more fellow businesses that need to produce more goods for export. That’s why Dave Kansas of the Wall Street Journal is particularly bullish on today’s report. But then what to make of the fact that last year’s fourth-quarter GDP number was revised downward this week, to 2.8 percent from 3.2 percent? To be sure, that’s still growth, but it means that these February figures might indicate an economy that is only now reaching the growth point we thought it had reached at the beginning of the year.
It’s all very confusing; the one takeaway is that America’s economic condition at the present moment is ambiguous. We’re growing, but not much, and the workforce is shrinking.