U.S. Job Growth Continues to Disappoint in March

Nonfarm payrolls grew by 88,000 in March while the unemployment rate stood at 7.6%, little changed from the month before, according to a report this morning from the Bureau of Labor Statistics. Bill McBride at Calculated Risk wrote Thursday that the consensus forecast was for an increase in nonfarm payrolls of 193,000 and for the unemployment rate to hold steady at 7.7%.

Here is a rundown of the best analysis of today's numbers:

The March report should end the excessive wave of optimism that led many analysts to claim the economy had reached a turning point and to talk about the end of the Fed's quantitative easing policy. It is bizarre that this sort of talk ever gained much currency. After all, the economy grew at just a 1.6% annual rate in the second half of 2012. While the February jobs report was better than expected, and the last five months showed somewhat more rapid growth than the year-round average, it was well below the pace from a year ago.

The unemployment rate ticked down to 7.6% in March, but not for positive reasons. The decline is due to people dropping out of the labor force, not an increase in the share of the working-age population with jobs. In fact, the labor force participation rate dropped to its lowest point of the downturn, 63.3%. What’s more, this weak labor force participation is not due to demographic factors such as retiring baby boomers; the labor force participation rate of the “prime-age” population, people age 25–54, is also at its lowest point of the downturn, 81.1%. It’s the lack of job opportunities — the lack of demand for workers — that is keeping these workers from working or seeking work, not other factors.

Long-term unemployment remains a significant concern. Nearly two-fifths (39.6%) of the 11.7 million people who are unemployed — 4.6 million people — have been looking for work for 27 weeks or longer. These long-term unemployed represent 3% of the labor force.  Before this recession, the previous highs for these statistics over the past six decades were 26% and 2.6%, respectively, in June 1983.

For those communities with empty storefronts, idle factories, and households under financial pressure to find a source of income, Congress has offered actual tribute of no time or attention. Yes, senators and representatives may tour around and shake hands and make speeches, but in the job these congressmen and women are paid, in part, to do — create jobs and foster a functioning economy — they are taking the salary and accomplishing nothing at all. They turn their eyes and ears to the chatter and cafeteria gossip of the Washington fights over the "sequester" and the fake crisis of long-term deficits, while a real, immediate disaster in their own constituencies has grown unchecked for five years.

In case you missed it, Brad Delong has perhaps the most depressing analysis you could read on the economy and the state of policy.

  • Brad Delong, National Bureau for Economic Research — Let it Bleed?

In the 12 years of the Great Depression — between the stock-market crash of 1929 and America’s mobilization for World War II — production in the United States averaged roughly 15% below the pre-depression trend, implying a total output shortfall equal to 1.8 years of GDP. Today, even if US production returns to its stable-inflation output potential by 2017 — a huge "if" — the US will have incurred an output shortfall equivalent to 60% of a year’s GDP. 

In fact, the losses from what I have been calling the “Lesser Depression” will almost certainly not be over in 2017. There is no moral equivalent of war on the horizon to pull the US into a mighty boom and erase the shadow cast by the downturn; and when I take present values and project the US economy’s lower-trend growth into the future, I cannot reckon the present value of the additional loss at less than a further 100% of a year’s output today — for a total cost of 1.6 years of GDP. The damage is thus almost equal to that of the Great Depression – and equally painful, even though America’s real GDP today is 12 times higher than it was in 1929.

Finally, here is a helpful graph from Benjamin Landy at The Century Foundation showing that for every job we’ve created since 2011, someone left the labor force.


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