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Unemployment Report: Finally, Some Good Numbers

Daniel Gross on the takeaways from this month’s impressive unemployment report.

Well, Friday’s jobs report—aka the most important jobs figure of all time, ever—didn’t disappoint. The Bureau of Labor Statistics reported that the U.S. economy added 114,00 payroll jobs in September, and that the unemployment rate fell from 8.1 percent to 7.8 percent. Here are a few important takeaways.

The labor market is recovering, 1.

The payroll-jobs figure shows the labor market is recovering. The economy has now added jobs for 24 straight months. Since February 2010, the private sector has added 4.7 million new positions. Employment is pretty much back where it was in January 2009.

The labor market is recovering, 2.

The household survey—the component of the jobs report that yields the unemployment rate—has generally told a less positive story than the payroll-jobs figure, which describes how many people companies are hiring. For the household survey, BLS calls people and asks if they’ve been working, if they’ve given up, if they’re working part time. This survey yields not only the unemployment rate, but the size of the labor force, the employment-to-population ratio, and an alternate measure of employment. And in recent months, even as payroll jobs grew, many of these measures went in the wrong direction.

In September, however, the household survey flashed all kinds of green lights. Instead of contracting, the labor force grew over the month, by 418,000. And yet the unemployment rate fell to 7.8 percent from 8.1 percent in August. The reason: all these new entrants to the labor force were absorbed, and then some. The household survey found that some 873,000 more people were at work in September than in August, and that the employment-to-population ratio ticked up from 58.3 percent to 58.7 percent.

The trend is the friend.

Over the past few years, we’ve seen a pattern develop, one that is common during the early stages of labor-market recoveries. The BLS revises its monthly data in each of the successive months. Then it revisits all the numbers and issues annual revisions. The trend has generally been for the revisions to be positive. That may not do much for political campaigns that live and die by the headline number, but it is good news for the economy. So, for example, in September, BLS reported that the economy created 386,000 more jobs between March 2011 and March 2012 than originally thought. This month, BLS looked back on July and August and found lots of new jobs. The July figure, previously reported as a gain of 141,000 jobs, was revised to a gain of 181,000. The August figure, originally reported as an anemic 96,000 gain, was revised to a more impressive 142,000. That’s 86,000 additional jobs.

Austerity fever finally breaking?

The outstanding feature of the labor market in the past few years has been what I’ve dubbed the “conservative recovery.” Each month, the private sector adds jobs while the public sector—government—cuts them. Between February 2010 and August 2012, the private sector added more than 4.5 million jobs. But between May 2010 and May 2012, cash-strapped government entities cut more than 1 million jobs. Which meant the public sector continually acted as a drag on employment. This month it seems the austerity fever finally broke. The government sector added 10,000 positions in September, and revised figures show the sector added 45,000 jobs in August.

Don’t get too excited.

By any measure, however, the labor market is still a long way from where it should be. The U6, a measure that takes into account frustrated part-timers and people who have stopped looking, stood at 14.7 percent in September, unchanged from August. Average hours worked and weekly wages bumped up a smidgen. As BLS notes, “Over the past 12 months, average hourly earnings have risen by 1.8 percent.” That’s not much. The economy has essentially recovered all the jobs it lost in 2009 and early 2010. Now it has to get to work recovering the millions of jobs it lost in 2008.