Despite adding fewer jobs than expected in March, the economy is improving, says Zachary Karabell.
FROM THE DAILY BEAST | APRIL 6, 2012
Today’s latest installment of the official jobs data should be final proof—if more is needed—that the U.S. economy is no longer mired an acute employment crisis. According to the Bureau of Labor Statistics, the U.S. labor force grew by 120,000 in March, continuing a trend now more than a year old of steady improvement, but less emphatically than the past three months when surveys showed gain well in excess of 200,000 per month.
The headline number that receives the lion’s share of attention–the unemployment rate—is now at 8.2 percent. Meanwhile, the number of people employed in manufacturing rose by 37,000 and has gained almost half a million since the lows of early 2010. In all, jobs were added not just in manufacturing but food services, health care and the fuzzy category of “business services.”
Taken together, the data will form the template of the ongoing debate about the economic state of America. Today’s numbers will sharply disappoint financial markets, which had expected more, but because the report comes on Good Friday and financial markets in the U.S. and Europe are closed, and because said markets tend to have the memory retention of the average slug, it’s unclear what the effect will be when trading resumes on Monday.
On the political trail, while this month’s number will disappoint elevated expectations, it is not low enough to derail the Democratic narrative that finally, the overall system is mending and gathering momentum. Nor is enough to provide wind for the Republican narrative of a broken economy broken by President Obama. It is also just tepid enough to give those who are deeply pessimistic no reason to embrace hope, and just strong enough to give those who are hopeful no reason to despair.
It must always be noted that these numbers are statistics—and complicated ones, based on tens of thousands of surveys from businesses and households which are then massaged by a variety of quantitative techniques to produce the unemployment rate, the size of the labor force, and a host of other numbers. They are not absolutes, and they are not unequivocal facts. The definition of “unemployment” is not simply out of work; you can be without a job for years and not “unemployed” as a statistic; once you cease actively looking for work, you cease to be part of the workforce and hence are not “unemployed.” “Employed” also says nothing about wages. You can have two jobs and still earn less than the official poverty rate or be unable to support a family of five, and that indeed is the case for tens of millions of people.
These reports have assumed increasing significance as part of our collective attempts to assess the long-term strength of the United States. In the absence of great power global tensions—China notwithstanding—matters economic have assumed the place once occupied by military affairs and the machinations of diplomats. The coming presidential and congressional election will likely hinge on whether more Americans believe their economic future will be better or worse, and for now, that question hangs in the balance. Though the employment picture has changed dramatically and for the better since the worst months of 2009 and 2010, it remains a challenging landscape with far higher levels of chronic unemployment and underemployment lasting far longer than the country has known since before World War II.
In an election year, these statistics assume even more totemic importance. And our politics demand simple stories, thumbs up, thumbs down. Because the job situation is statistically better but not better enough, the debate can and will continue. Because the trajectory has been clearly upward, however, the onus will be on the Republicans to offer credible reasons why they believe the system is broken and how they can fix it. As of now, neither politicians nor economists have done well with the economy as it is.
These reports demonstrate what has been true for years, namely that the American economic system is working adequately for most, spectacularly for a few, and failing dramatically for a not-insignificant portion of the population. As the job picture overall has brightened, there has been no change in the number of long-term unemployed (5.3 million). Nor has there been much change in the “labor force participation rate,” which means that even as the U.S. population expands, more people aren’t getting jobs proportionately. And the data on hours worked is stagnant, which means that many people who have jobs can’t work enough hours to earn what they need. New job creation, as the Hamilton Project at the Brookings Institution has shown, is insufficient to keep pace with demographics, which means that even at a rate of 150,000 to 200,000 new jobs per month, the overall system will still have a gap between needed employment growth and actual employment gains.
And of course, what the debate and the numbers fail to capture is the growing mismatch between the skills possessed by many job seekers and the skills needed by many employers. Hence the dramatic gains in less-skilled, lower wage jobs and the growing number of unfilled skilled positions in everything from manufacturing to services. Hence as well the absence of meaningful employment problems for college educated (over time) and those with a high school degree. Yes, it can be tough for a college grad in the first years out of college, but statistically that challenge abates after the age of 25; that is not the case for high school grads and dropouts.
This last issue is both underappreciated by economists and underemphasized by politicians. Economists are in thrall to the notion of employment as logical, predictable and cyclical, with current problems being the product of a financial crisis and hence slower to mend. Politicians don’t want to address the vagaries of class and education when discussing employment because that would be require addressing the issues of class and education, not to mention race, and why tread willingly in that minefield when you can use high gas prices as an easy debating point?
There are more voices calling attention to these real, structural changes occurring in the United States, changes that are generational and dramatic, and those voices may even elbow their way into the political debate this year. These monthly jobs numbers will only be helpful if they begin to force that discussion and demand attention to both what is working and what is not. Slavish dedication to “jobs added” and “unemployment rate” is easy and cheap; it will play well in the political arena; but it will not move our collective needle, unmoor our ship from the doldrums, or reshape our economy for the future we all crave.