March's jobs report showed that a net 88,000 new jobs were added last month and the unemployment rate fell to 7.6% -- the lowest level in more than four years.
That was the good news. The bad news is that this is, by most accounts, a dismal result.
Theoretically, at least. Any given employment report has a margin of error of plus or minus 100,000, and nearly all initial reports are revised in subsequent months. Indeed, March's jobs report revised January and February's figures up by 61,000 jobs. One of the only things we are reasonably assured of is that the economy didn't create 88,000 jobs in March -- a truth that never quells the hyperventilating when initial employment reports are released.
To smooth out month-to-month volatility, I look at a rolling six-month average change in monthly jobs:
Source: Bureau of Labor Statistics.
For the last three years, we have created enough jobs to keep up with population growth -- maybe a bit more -- and that's about it. There has been almost no deviation from this trend, too. 2011 saw average monthly jobs growth of 175,000. 2012's average figure was 183,000. In the first three months of 2013 we've averaged 168,000. Statistically, these numbers are almost indistinguishable. It has been one of the dullest recoveries on record.
The unemployment rate, however, is in decline -- and not just the standard unemployment rate most often cited in the media. The Bureau of Labor Statistics calculates unemployment several different ways, with some measures counting not just the unemployment, but those who have given up looking for work and those working part-time but desiring full-time hours. Importantly, all show the same trend: downward.
Source: Bureau of Labor Statistics.
But this poses a question: If jobs growth is so dull, why is the unemployment rate dropping across the board?
In part because fewer Americans are taking part in the labor force and thus aren't counted in the unemployment statistics. The labor force participation rate, which counts working-age Americans who either are employed or are unemployed and looking for work, fell in March to the lowest level since the Carter administration:
Source: Bureau of Labor Statistics.
Part of this decline is due to a weak economy. But there's more to it; the decline clearly began before the recession.
There are three big explanations for why so few Americans are in the labor force:
- The country is aging.
- Men have been leaving the labor force consistently for 60 years.
- More people are in school.
As baby boomers retire, the demographic bulge of those born in the 1950s and 1960s exits the labor force. Demographers predicted a sharp decline in the labor force participation rate years before the recession began. Even if the economy were booming, the labor force participation rate would almost certainly be falling.
Second, men have been leaving the labor force consistently for more than half a century as women enter the labor force, changing the dynamic of a two-income household. And third, more young Americans in school means fewer looking for work.
These trends are important for one reason: They mean we need to create fewer jobs to bring down the unemployment rate today than we did in the past. That's why dismal jobs growth has been met with a healthy decline in the unemployment rate.
But the best context we can put today's jobs recovery in comes from the blog Calculated Risk:
We are living through the worst employment disaster since the Great Depression. After every monthly jobs report, analysts parse the numbers and pick apart the details, but that one sentence is really all that matters.
