January Jobs Report: Good But Not Good Enough

This morning the U.S. Bureau of Labor Statistics (BLS) reported that the unemployment rate edged up slightly to 7.9% in January as nonfarm payrolls increased by 157,000 jobs. January's jobs figure was somewhat below the average gain in the previous three months (201,000).

On the whole, the recovery remains on track, but the pace of job growth remains perilously slow.

The figure above presents unemployment rates by educational attainment this January and in January 2007, before the recession began. The figure makes clear that the advantages of college completion are substantial, but even college graduates continue to experience abnormally high unemployment rates compared to before the recession.

Below are some key observations from D.C.'s leading labor economists on today's jobs report.

The average duration of unemployment spells fell by 2.8 weeks, the largest drop ever. The median duration fell by 2 weeks and the share of long-term unemployed fell by 1.0 percentage points. This decline undoubtedly reflects the shortening of the period of extended benefits after the fiscal cliff deal. Since workers are required to look for jobs to get benefits, it appears that many of the unemployed stopped looking for work when their benefits expired and therefore are no longer counted as unemployed.

With the upward revisions to the November and December data, the picture in the establishment survey looks somewhat brighter. However, it is likely that these numbers are at least somewhat inflated due to unusually warm weather. There was a similar story last year with the winter months showing relatively good job growth. The result was that hiring was moved forward and the spring months then looked exceptionally weak. We may see the same story this year. 
  

This is certainly not the rapid employment growth needed to drive down unemployment. It’s like we’re in Bill Murray’s “Groundhog Day” – each month we wake up to the same report, with all the indicators – employment, unemployment, labor force participation, hours, wages – painting the same picture over and over. We are still in a crisis-level jobs hole. The U.S. labor market started 2013 with fewer jobs than it had 7 years ago in January 2006, even though the potential workforce has grown by over 8 million since then. The jobs deficit is so large that at January’s growth rate, it would take until 2021 to get back to the pre-recession unemployment rate.
  

Policymakers missed an opportunity in the recent “fiscal cliff” negotiations to resolve the sequestration issue by adopting policies that achieved equivalent budget savings that were more balanced between taxes and spending and that did not take effect until the economy was stronger. They missed an opportunity to boost the recovery and brighten jobless workers’ job prospects when they failed to extend the payroll tax cut.
  

Initially, there was some discussion of new infrastructure investment in the run up to the fiscal cliff deal. Economist Mark Thoma makes a strong case for a renewed push for infrastructure spending to boost employment growth and the long-term growth of the economy.

A pair of economists from the Federal Reserve Bank of San Francisco put some numbers on federal investments in state infrastructure and their impact on state-level economic activity.

Overall, each dollar of federal highway grants received by a state raises that state’s annual economic output by at least two dollars, a relatively large multiplier.

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