According to the
Atlanta Fed jobs
calculator, if we continue to create 163,000 jobs per month it will take
over four years (52 months) for unemployment to fall to 6 percent. So while the July labor numbers at least reversed the recent hiring slide, much higher rates of job
creation are required to significantly improve the labor market. How much higher? For the jobless rate to descend to 6 percent within 18 months, the economy would have to produce an
average of 279,000 jobs per month.
If the Labor Department report represents a modest, though far from spectacular,
improvement over previous months, why did the unemployment rate tick up by a
tenth of a point to 8.3 percent? The answer is that the job-creation number is
based on the government's "establishment" survey, while the unemployment rate comes from a
survey of households, meaning that the two numbers aren't strictly comparable.
Still, the fact that the numbers from the household survey, such as the unemployment rate, labor force participation rate, and employment-to-population ratio are all relatively flat is consistent with the interpretation of the job-creation number as an improvement over previous months. The job market isn't exactly stagnating, in other words, but it's far from spectacular.
When other risks, particularly those from Europe, are factored in,
the outlook for the economy is even more uncertain, and potentially much weaker.
Thus, this report is likely to raise speculation that the Federal Reserve will do more to stimulate
the economy at its next meeting.
Of course, the Fed was already aware of the risks from
Europe and elsewhere, and if weaker job and economic growth numbers over the last few months weren't
enough to prompt the central bank to do more, it's hard to see how the slight improvement
in the numbers would alter the Fed's course. The Fed is particularly unlikely to intervene if subsequent economic data
reinforces the view that the economy is in better shape than in recent months.
Overall, we appear to be at least holding ground, and perhaps making a few gains. But given the uncertainty surrounding both the establishment and household surveys, and the uncertainties ahead, the best takeaway is that things may not be as bad as they looked the last few months, but there is nothing in today's employment report to suggest anything but very modest growth and a much too slow recovery.