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Are Jobs Coming Back?

By Heather Boushey

There's a new word that I've learned this year: "nadir." I'm not quite sure how to pronounce it, but it means "the lowest point" and seems an apt description of the state of the US economy.

Now two years into the economic recovery, the US has stopped hemorrhaging jobs and has added jobs for 7 straight months, but the situation is still just a smidgen above the darkest days of the crisis in terms of the share of people out of work and the odds that an unemployed worker can find a new job.

Some sobering jobs numbers have come in:

  • Labor department data shows that the number of applications for unemployment benefits dipped slightly, but the declines follow much bigger increases in April.
  • ADP, the nation's largest payroll firm, reported Wednesday that employers added only 38,000 jobs in May.

On Friday, the Bureau of Labor Statistics will release the official job growth numbers. ADP over- or under-shoots the actual employment data by about 90,000 jobs on average, but nonetheless, the signs are not encouraging.
What should the Friday numbers show in order for the US to have definitively turned the corner on employment? Here are three signs, and this will explain why I'm not optimistic.

1. A big uptick in employment: Employers should have added between 250,000 and 300,000 new jobs in May, preferably alongside upward revisions for March and April. This kind of job growth is, however, above expectations.

The Wall Street Journal reports economists estimate that employers added around 190,000 new jobs in May. Not terrible, but still not enough job growth to bring the unemployment rate down. At about 190,000 new jobs per month, it will take more than three years to gain back the jobs lost since the recession--and that's without accounting for new labor market entrants.

2. An increase in the hours worked by the employed: This is especially important if we don't see at least 250,000 new workers hired in May. Employers typically ramp up the hours of the workers they have on staff before they start hiring new workers. Thus, increases in hours are often followed by increased hiring. In both April and March Production and non-supervisory employees worked an average of 33.6 hours per week, below the 2000s recovery peak of 33.9 hours per week, and far below the late 1990s peak of 34.6 hours per week.

3. More people entering the labor force. Barring actual good news on hiring or hours, if people are feeling optimistic that jobs gains are around the corner, then we should see people entering the labor force. For those out of work, it continues to be the case that finding a new job is extremely challenging and over the past few years, many have simply given up looking.

Since right before the recession began in September 2007, the number of such "discouraged workers," has risen by more than 250 percent to 989,000. If firms start hiring or people perceive they are about to hire (their cousin got a job or they heard from a friend that the office park the next town over is hiring), then many of these workers are likely to jump back into the labor market. That would be a sign of optimism, which may, for a while at least, lead to a higher reported rate of unemployment as these folks entering or reentering the labor market job search.

What other economic indicators show
Of course, we can't make too much out of one month's worth of data. And, the job market is what economists call a "lagging indicator," meaning that employment will grow as a result of businesses ramping up investment, which will drive up economic growth, and, eventually, hiring.

So what do other economic indicators show? Last week, Berkeley economist Brad DeLong posted a blog that had the provocative title, "Time to PANIC!!" as he pointed to new data that showed economic growth continues to be too slow to lead to much higher levels of hiring.

Friday's job data will show us how well the US is recovering from the Great Recession, now two years into the economy recovery. But, to have it start feeling like a recovery--that the US has moved beyond the nadir--the stats need to show sharply rising employment numbers.


Heather Boushey is Senior Economist at the Center for American Progress. Her research focuses on employment, social policy, and family economic well-being. Much of her current work focuses on the Great Recession's impact on workers and their families, as well as policies to promote job creation. She co-edited The Shriver Report: A Woman's Nation Changes Everything (Simon & Schuster ebook, 2009).
image courtesy of flickr user, Shapermc
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