May 02 2014 -
Great Job Growth for this Recovery, Only Average by Historical Standards
Today, the Bureau of Labor Statistics (BLS) announced that it estimates that the economy added 288,000 nonfarm payroll jobs (273,000 in the private sector) and that the unemployment rate declined by 0.4 percentage point to 6.3% during April. The large decline in the unemployment rate was driven in part by the labor force participation rate declining to 62.8%.
Private Sector Payroll Employment
The gain of 273,000 private sector payroll jobs is the third largest monthly gain since private sector payroll employment bottomed in February 2010 – 50 months ago.
When placed in the context of other post-1960 recoveries, the gain goes from great to merely average. The average equivalent gain, calculated on a percentage basis, of prior recoveries was 263,000 over the 50 months following the cycle low point. The equivalent average gain over the comparable period of the Reagan recovery in the early 1980s was 327,000.
As the accompanying chart shows, today’s report is only the fifth time that this recovery’s monthly private sector payroll jobs gain exceeded the equivalent average of other recoveries.
Regardless of what starting point you choose, the current recovery has failed to produce private sector job gains on par with past recoveries. Compared to the average of other post-1960 recoveries, the current recovery has created the equivalent of 5.7 million fewer private sector jobs since the end of the recession. Even when measured from the White House’s preferred point of comparison, the February 2010 cycle low, the private sector jobs gap is still an unacceptably large 4.0 million.
Employment, Unemployment, and the Participation Rate
The unemployment rate declined by 0.4 percentage point to 6.3% during April, while employment-to-population ratio was unchanged at 58.9%. As the accompanying chart shows, the decline in the unemployment rate is, in large part, a mirage driven by declining labor force participation.
If the labor force participation rate had not declined since President Obama took office in January 2009, the unemployment rate would stand at 10.4%, not 6.3%. Even at 6.3%, the rate remains well above the 5.0% rate that the 2009 stimulus legislation promised to deliver.
The actual size of the labor force declined by 806,000 in April and only increased by 62,000 over the past twelve months. The number of individuals counted as employed in the household survey declined by 73,000 in the month, but has risen by 2.0 million over the past year. The number of unemployed persons declined by 733,00 in the month and has declined by 1.9 million over the past year.
Only about half of the decline in the labor force participation rate since the beginning of the recession began in December 2007 can be explained by changing demographics. One disturbing aspect of the current trend is the decline in labor force participation among those of prime working age. The only age groups that have shown increased labor force participation rates are those groups aged 60 years and older.
Today’s topline numbers – payroll job gains and the unemployment rate decline – are solid and among the best produced by the current mediocre recovery. However, as good as today’s report may appear, the private sector job gains are only on par with the equivalent average monthly gains of past recoveries. Measured from the end of the recession, even after today’s report, the private sector jobs gap is 5.7 million.
The declining unemployment rate remains primarily a mirage driven by declining labor force participation – a point further evidenced by the fact that a smaller percentage of adult Americans are employed now than when the recession ended in June 2009.