The new jobs report is out and it’s not good at all. It may not suggest the economy is slowing down, at least according to the economists I’ve consulted and read. But it certainly suggests the economy wasn’t growing as fast as we thought. And it’s not like anybody thought it was growing that fast in the first place.
The Bureau of Labor Statistics announced Friday morning that the economy created just 69,000 jobs last month. It also revised its estimate for April, down to 77,000 from 115,000. Unemployment has gone up a tenth of a percentage point, to 8.2 percent. That’s partly because more people have returned to the labor force, seeking jobs. But that’s really the only hint of good news in what economists everywhere are calling a dreary report.
It’s just one month, of course. But the May numbers, along with the revisions of previous months, suggest the relatively strong growth we saw in January, February, and March may have been a blip after all. Those of us who thought the winter numbers might suggest a stronger recovery were evidently wrong.
Here, via e-mail, is the University of Pennsylvania’s Betsey Stevenson, who was chief economist at the Labor Department from September 2010 through September 2011:
The report overall shows an economy recovery at a much slower pace than previously thought. Nonfarm payroll growth in May was weak at 69K, but much more worrying is the revisions to the previous two months. April was revised down substantially from 115K to 77K and March was revised down slightly from 154K to 143K. This tells us that this month is not a statistical fluke, but rather we now have evidence that the recovery not wasn’t accelerating in January and February as previously believed, but it may be slowing as we head into summer.
However it should be noted that the employment to population ratio hit a low point in April and recovered by .2 of a percentage point in May. The household data shows a large increase in the number of people with jobs. Additionally the labor force participation rate increased. Both reports should be considered to paint a full picture of the labor market, but since the household data showed a net loss of jobs last month even this silver lining isn’t enough to indicate a recovery continuing on strongly.
Jesse Rothstein, an economist at the University of California-Berkeley, offered TNR a similar take:
I suspect (based on what CNN is saying) that this is going to be read as a sign that the economy is slowing down. I think that’s misreading things, mostly because I think we never sped up to begin with. There were a couple of somewhat better months, but I always thought—and in retrospect I think I was right—that those were likely to be temporary blips rather than a real change in trend. So we’re still stagnating. Which isn’t a surprise—our policymakers haven’t really done anything in a year or more to improve things, so things aren’t improving. Of course, the way things are going, we’ll be lucky if they don’t take action to make things worse in the next few months.
Rothstein is right, particularly on that last count. We’re going to hear a lot about the political implications for President Obama and his reelection bid. And you can’t sugar-coat those implications any more than you can sugar-coat the report itself. But the focus should be on the underlying reality. An awful lot of people are out of work, which means an awful lot of people struggling to pay their mortgages, put gas in their cars, and feed their families.
It doesn’t have to be this way. Policy-makers have the power to change this: As a matter of fact, Obama’s jobs bill would be a fine place to start. But Republicans have no interest in that proposal or, as far as I can tell, any proposal that involves the sort of traditional Keynesian stimulus that the majority of mainstream economists believes boost demand.
Mitt Romney pounced on the “devastating” jobs report, saying, “We can do so much better in America. That’s why I’m running for president.” It’s true we can do better. But, as noted here previously, Romney doesn’t actually have a plan to boost employment or growth in the short term.
Oh, and did I mention that government payrolls fell again? One easy way to help the economy would be to give state and local governments more assistance, as the Recovery Act did and as the federal government has traditionally done during tough economic times. That’d have the virtue of creating jobs and helping these governments meet the still pressing need for income support and social services among the un- and under-employed.
Alas, the best hope for boosting the recovery at this point might be more action from the Federal Reserve. It remains to be seen whether the Fed is willing to act.
For more analysis, see Dan Gross and Matt Yglesias. Both have been relative optimists. Both agree this report is bad news.
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