Jobs Lost to Recession Trickle Back, But Wages Lag
U.S. job growth slumped in April for a second straight month. It suggested an economy that is growing steadily but still sluggishly, which could tighten the presidential race.
A drop in the unemployment rate wasn’t necessarily a healthy sign for the job market. The rate fell from 8.2 percent in March to 8.1 percent in April. But that was mainly because more people gave up looking for work.
People who aren’t looking for jobs aren’t counted as unemployed. The 115,000 jobs added in April were fewer than the 154,000 jobs added in March, a number the government revised up from its earlier estimate of 120,000. It also marked a sharp decline from December through February, when the economy averaged 252,000 jobs per month.
The percentage of adults working or looking for work has fallen to its lowest level in more than 30 years. Many have become discouraged about their prospects.
Job creation is the fuel for the nation’s economic growth. When more people have jobs, more consumers have money to spend — and consumer spending drives about 70 of the economy.
THE LONG SLOG BACK
Job creation has been frustratingly slow since the Great Recession ended. Only 43 percent of the jobs lost have been regained 34 months later.
The rebound was only slightly stronger after the previous recession, which ended in November 2001. By September 2004, 54 percent of the jobs lost had been regained. It took five more months before all the jobs were back.
The problem this time isn’t that companies haven’t been hiring: They’ve added more than 1 million jobs in the past six months. It’s that the Great Recession killed so many jobs in the first place — 8.3 million.
By contrast, the 2001 recession eliminated 1.6 million jobs.
A PENNY MORE FOR YOUR WORK
For people with jobs who assume they’re not affected by Friday’s report, take notice: The report notes that the average worker’s hourly pay eked out a gain of just one penny in April.
Over the past year, average hourly pay has ticked up 1.8 percent to $23.28. Inflation has been roughly 2.7 percent. Which means the average consumer isn’t keeping up with price increases.
NOWHERE TO HIDE
Hiring was weak, if it occurred at all, in eight of 10 industry categories the government tracks. Manufacturing, which has been a source of strength, added 16,000 jobs. Education and health services, which tend to be less affected by economic cycles, added 19,000.
It was the smallest gain in five months for both categories. Leisure and hospitality, a bellwether for consumer spending, had its tiniest gain — 12,000 jobs — in eight months. Federal, state and local governments cut a combined 15,000 jobs.
There were two bright spots: Retailers added 29,300 jobs after cutting jobs the previous two months. And professional and business services added 62,000.
YOUNG AND UNEMPLOYED
It’s a tough time to be young in America. The unemployment rate in April for workers under 25 was 16.4
percent. That’s nearly 10 percentage points above the rate for those 25 or older.
It could be worse. You could live in Europe. In the 17 countries that use the euro, the unemployment rate for young workers is 22.1 percent.
Or worse still. In Greece and Spain, two of the countries most damaged by Europe’s debt crisis, one in two workers under 25 is unemployed.
TEPID ECONOMY, TEPID HIRING
Over time, strong economic growth is vital for strong job growth.
But early this year, hiring accelerated much faster than economic growth did. Job gains averaged a strong 229,000 in the first three months. By contrast, the economy grew at a sluggish annual rate of 2.2 percent.
Economists began to wonder: Would growth catch up with hiring? Or would hiring slow to match economic growth as measured by gross domestic product, or GDP?
Some analysts say April’s disappointing job growth suggests an answer, and it’s not a cheerful one:
“It now appears that jobs have decelerated into line with GDP, rather than GDP accelerating to catch up with jobs,” said Nigel Gault, an economist at IHS Global Insight.
The job market seems to look better with hindsight. The Labor Department has revised job growth upward for 10 straight months — and for 18 of the past 21. Over the past 10 months, it’s added 413,000 jobs to the original estimates.
The job figures are revised twice. They’re updated in the two months after they first come out. And they’re revised again in an annual update.
History shows that the updated totals typically follow the trend in job creation: When the economy is creating jobs consistently, the revisions tend to be positive. Months of job losses typically lead to negative revisions.
THE POLITICAL DEBATE
A falling unemployment rate would seem to be good news for President Barack Obama’s re-election hopes. Dating to 1956, no incumbent president has lost when unemployment fell in the two years leading to an election.
On Election Day, unemployment will almost surely be less than it was two years earlier: 9.8 percent in November 2010. But for the past two months, the rate has fallen for the wrong reason: More than 500,000 Americans have stopped looking for jobs and are no longer counted as unemployed. Job growth averaged a healthy 252,000 from December through February. It slowed to an average of 135,000 in March and April.
The question is whether voters will focus more on the falling unemployment rate (good for Obama) or the modest job growth (not so good).
A JAB FROM ROMNEY, A DEFENSE FROM OBAMA
Mitt Romney seized on the latter. He noted that the declining number of people seeking work explains the drop in the unemployment rate.
“This is way off from what should be happening in a normal recovery,” Romney said on Fox & Friends. “You have more people dropping out of the work force than you have getting jobs.”
“This is not progress,” Romney said.
Obama pushed back. He countered that businesses have added about 1 million jobs in the past six months. But speaking at a school in Arlington, Va., the president said “we’re going to have to do more” to recover jobs lost during the recession.
“My message to Congress is going to be, `Just saying no to ideas that will create new jobs is not an option,’ ” Obama said.
RECOVERIES WITHOUT JOBS
Economists note that “jobless recoveries” are becoming the norm. In part, that’s because layoffs during recessions are more likely to be permanent.
Workers who were cut during downturns before the 1980s were usually hired back once the economy perked up. This time, many jobs are being restored only slowly.
Companies are also quicker to lay off employees at the first sign of slowing growth. And as they find ways to squeeze more work from their remaining staffers, they’re slower to rehire.
The percentage of Americans 16 and older working or looking for work is now 63.6 percent, the lowest since 1981. For men, the so-called “labor force participation rate” is 70 percent. That’s the lowest since the government started keeping records in 1948.
The rate peaked at 67.3 percent in early 2000 after women had poured into the work force over the previous four decades. Since then, it’s turned south. Demographic and social trends help explain the drop: Baby boomers are aging and retiring.
And more women, especially in upper-income families, are staying at home. The drop in the participation rate accelerated after the economy slid into recession in late 2007. The tough job market led many to give up looking for work.
The stock market didn’t take Friday’s news well. The Dow Jones industrial average sank 168 points, or 1.3 percent, in mid-afternoon trading. The broader Standard & Poor’s 500 index fell 1.5 percent.
Investors were a lot happier earlier this week. They sent the Dow to its highest close since December 2007.
Technology stocks and banks led the market lower Friday. Utility companies were the only broad category of stock in the S&P 500 index trading higher. They tend to fare well when investors grow nervous about the economy.
Investors flocked to the safety of U.S. government bonds. The yield on the benchmark 10-year Treasury note dropped to 1.88 percent, its lowest point since February, from 1.92 percent late Thursday.
NOT EXPLOSIVE, BUT STEADY
By some measures, job creation has been consistently solid. For example, more than 100,000 jobs have been added for eight straight months. It’s the first time the economy has achieved that feat since 2005.
Consider, too: Employers have added at least 100,000 jobs every month this year. That would be an impressive streak if it continues through 2012. The last time the economy added 100,000 or more jobs every month in a calendar year was 1999.
(Copyright 2012 by The Associated Press. All Rights Reserved.)