Commentary Magazine

A Shockingly Terrible Jobs Report

Image by © AARON HARRIS/Reuters/Corbis

The monthly jobs report came as a shock this morning, with a dismal increase in jobs of only 38,000 for the month of May, far under the approximately 150,000 that economists had expected. The number of jobs created in April and March were also revised downwards by 59,000. This means that over the last three months, job creation has averaged about 116,000 jobs per month; a notable slowdown from the 12-month average of 219,000 jobs.

However, the unemployment rate, which is calculated from a different survey, fell by a substantial .3 percent to 4.7 percent. You have to go back to September 2007, before the start of the recession, to find a rate that low. But the participation rate, a measure of the percentage of people over 16 currently working or looking for work, last month fell .2 percent to 62.2 percent, wiping out the gains earlier this year. The rate was far higher in September 2007. So, if we had that rate now, unemployment would be far higher. You have to go back forty years to find a participation rate as low as 62.2 percent.

The big question, of course, is how this will affect the Federal Reserve’s action on interest rates at its June meeting. Fed chairman Janet Yellen was hinting earlier that the Fed might let interest tick up a bit, but that seems less likely now in view of this report.

The so-called Great Recession technically ended in June 2009. But it won’t be over psychologically until interest rates return to normal levels from their current historic lows.

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