06.01.12 2:16 PM ET
Jobs Numbers: Get Used to Bad Employment Data
Today’s employment figures show that America has entered job stasis. The headline number—69,000 jobs added—was weak at best, made worse by revised data for March and April that subtracted another 50,000 jobs, give or take. The unemployment rate nudged up to 8.2 percent from 8.1 percent, but truly the most notable thing about this release was that there was nothing truly notable.
Yet taken as part of a series, these statistics form a picture of a national economy that is either lodged securely in second gear or in danger of stalling. Which of those two describe the future depends largely on your perspective. Those who read the amorphous tea leaves and see proverbial green shoots in continued strength in manufacturing, stability in national employment, and the comparative strength of the United States in a global system that is under pressure can take from these employment figures enough to bolster that view. Those who read the ominous deterioration of the euro zone as a prelude to a wider global contraction, who see faltering in China and a United States that seems unable to address its own debt issues, will see in these numbers proof that we are at the start of the next dangerous chapter in a global meltdown.
Financial markets have already made their decision: we are on the verge of another near-collapse, or perhaps even a real collapse. These fears and assumptions have a way of becoming self-fulfilling, given the degree to which markets are governed by sentiment and psychology and the almost pathological need to determine future outcomes with certainty. And when there is fear, trying to price in worst-case scenarios quickly gets you to zero. Today’s job report adds to the maelstrom.
America’s political process will not do much to ameliorate matters. Republicans in Congress, trying to maintain the furor of the Tea Party, and presidential challenger Mitt Romney, have a vested electoral interest in portraying the United States economy as broken by the policies of President Obama. That, combined with the looming “fiscal cliff” at the end of the year—when both parties in Congress will have to renegotiate the tax cuts and future spending that they failed to compromise on during the fateful downgrade summer of 201—offers little hope going forward.
And yet, while this vortex of negatively reinforcing views speaks volumes about the dysfunctional nature of politics and finance, that is not the only reality. Clearly, there is some degree of slowdown in global economic activity underway, as companies, countries, and individuals become cautious in the face of the fear and some significant unresolved structural issues in Europe, China, and the U.S. That is not the same as collapse, and the American labor market demonstrates that.
In fact, the labor picture in America has been shifting for decades, and recent dislocations have only stripped away the last vestige of collective denial. Some still maintain that current employment problems are a product of government policy and can be solved by better policies. But that is a faith-based view. What is evident in fact is that there is a dislocation many years in the making and many years in the healing, aggravated by poor public policy. There is a mismatch between skills and jobs, and between needs and wants. College graduates remain far better placed in this economic system, even with struggles in the first years after graduation. The unemployment rate for those with a bachelor’s degree dipped in May, according to this report, to 3.9 percent, which in truth is close to “full employment” given natural ebbs and flows.
Lastly, there is the problem of numbers and averages. Systemically, there is an 8.2 percent unemployment rate. There is a severely low “labor force participation rate” of 63.8 percent (though that did increase in May), which means that many people are so discouraged they aren’t even looking for jobs. And there are tens of millions of people underemployed or employed with a wage that pays them too little to rise out of poverty.
But individually, you can’t be 8.2 percent unemployed. Individually, your unemployment rate is one of two numbers: 0 percent or 100 percent. Some people may be in between given part-time work, but on the whole, one’s experience of this economy depends on education, geography, temperament, and expectations. Our need for a national story, a one-size-fits-all number, is an impediment to dealing with very real issues that affect us. A true jobs policy would acknowledge that there is a vast difference between employment in Nebraska and employment in industrial Ohio or housing-bubbled Florida. It would distinguish between a 47-year-old unemployed welder and a 27-year-old underemployed college grad. And it would find a way to address the financial system and separate needed commercial and retail and banking activities (loans for businesses and homes) from financial industry activity (mergers, public offerings, trading).
So here we are, with a slew of data that do little to assure us that things are OK, and not quite enough to convince us that things are really bad. Combined with a global environment of real crisis in Europe and questions globally, we are likely in for another confusing, hot summer of ricocheting data and sentiment. In an election-year United States, the absence of clear direction may trigger more fear. Better would be for it to lead to clearer discussion about both strengths and weakness that these reports identify, and to build on the former while addressing the latter. This is a system that is expanding, that is gainfully employing more than not, and has systemic strengths that much of the world lacks or aspires to. That should not be forgotten.