Is the Great Recession finally over? It would seem so with total nonfarm payroll employment up by 288,000, and the unemployment rate down by 0.4 percentage point to 6.3 percent in April, the U.S. Bureau of Labor Statistics reported today.
And the change in total nonfarm payroll employment for February was revised from +197,000 to +222,000, and the change for March was revised from +192,000 to +203,000. Need we say more about the jobs recovery? In fact, private employment is now above the pre-recession peak by 406 thousand, but we are still 113,000 jobs below the overall pre-recession peak because governments lost so many jobs—such as 300,000 teachers.
It’s been the cutbacks in state, local and federal spending that has kept US from a full-blown recovery. This graph that compares government hiring under GW Bush (red line) with Obama (blue line) tells us the damage such a loss of government jobs has done to employment. So there is still much work needed to bring everyone back to work. A real shocker was that the labor force fell by 803,000 in the Household survey, which is why the unemployment rate plunged from 6.7 to 6.3 percent.
In fact, some economists are predicting there might be a labor shortage in 10 years, since so many are either dropping out of the labor force, or just not entering it in sufficient numbers as the baby boomers retire. There is no question that some of the damage was self-inflicted, what with the partisan budget battles and downgrading of US sovereign debt by S&P.
Other factors that kept growth and employment low were soaring corporate profits that weren’t reinvested, while workers’ wages and salaries remained stagnant, so that consumers spent less. The just released first quarter 2014 GDP grew 0.1 percent, in part because of the winter, but also because businesses didn’t order more goods to restock their shelves.
Some of the employment increase was also due to the end of a very severe winter, so we don’t know if such job creation can be sustained. It will be in part up to Janet Yellen’s Fed to keep interest rates down as long as possible, and not be fooled by the artificially low unemployment rate that is due more to workers leaving the workforce than entering it.
Harlan Green © 2014
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