The Long Crawl Towards Full Employment Continued in May

The Bureau of Labor Statistics (BLS) reported last Friday that total nonfarm employment increased by 217,000 in May, following a 282,000 increase in April.  So far this year, 214,000 jobs have been created on average each month, compared to a 204,000 average monthly gain during the same time period in the previous year. The nation’s official unemployment rate remained unchanged from last month at 6.3%. The Labor Force Participation Rate and the Employment-to-Population ratio remained unchanged in May.  

Here is a synopsis of what D.C.’s top labor economists had to say about the Employment Situation Summary for May.

This morning’s jobs report show payroll employment increased by 217,000, passing the pre-recession peak. This might sound like good news, but it is important to remember that return to the pre-recession level of employment does not mean we are back to health in the labor market.

The economy is healing, but far from healed. Almost six-and-a-half years have passed since the start of the recession, and in that time the working-age population grew by 14.5 million. That means we needed to have added millions more jobs than we have. More precisely, we now need 7 million jobs to get back to health in the labor market given growth in the potential labor force since the start of the recession. At the current pace of job growth, it will take nearly four more years to fill in that gap.

The May employment report showed another healthy month of job gains, with the economy adding 217,000 jobs. This brings the three month average to 234,000. If this rate is sustained, it will lead to a substantial decline in unemployment in the months ahead. However, this is difficult to reconcile with the weak growth the economy has seen in recent quarters, hence the fall in reported productivity in the first quarter. The job gains were concentrated in health care (33,600), restaurants (31,700), social assistance (21,300) and employment services (20,200).

To the surprise of many, the unemployment rate was unchanged in May. This is due to the fact that the 0.4 percentage point plunge in labor force participation reported for April was not reversed. The labor force participation rate remained at 62.8 percent.

More than six years after the Great Recession and the worst jobs slump since the 1930s began, today’s jobs report shows that payroll employment has finally topped its level at the start of the recession (see chart).  Still, with essentially no net job growth since December 2007 but a growing working-age population, many more people today want to work but don’t have a job.

The job losses incurred in the Great Recession have been erased.  There are now 620,000 more jobs on private payrolls and 113,000 more jobs on total payrolls than there were at the start of the recession in December 2007.  Because the working-age population has grown over the past six and a half years, however, the number of jobs remains far short of the number of jobs needed to restore full employment.  The pace of job creation so far this year (214,000 jobs a month) is the highest five-month average in over a year, and, if maintained, would gradually restore normal labor market conditions.  Faster job growth would clearly be better, though.

Even though the state estimates for May will be released until June 20th, the Federal Reserve Bank of Philadelphia developed unemployment estimates for Pennsylvania, New Jersey, and Delaware in order to alleviate uncertainty.

The Federal Reserve Bank of Philadelphia – State Unemployment Rate Nowcasts: May 2014:

Using an analytical method created by Bank researchers, we expect unemployment rates for May to decrease from 5.7 percent to 5.6 percent in Pennsylvania and from 6.9 percent to 6.7 percent in New Jersey and remain unchanged in Delaware at 5.8 percent.

The employment report for Pennsylvania in May will be released by the BLS next Friday June 20, 2014.  The Pennsylvania Department of Labor and Industry typically (but not always) releases the job numbers the day prior to the official BLS release. 

 

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