The Employment Report: Moving Sideways Isn't Good Enough
The employment report shows that the economy added 117,000 jobs in July. The private sector added more jobs than that, 154,000, but a decline in government employment reduced the headline number. The unemployment rate fell from 9.2 percent to 9.1 percent, but as the report notes, this is "partly because 193,000 people dropped out of the labor force."
This is not as bad as many people expected, but it still nothing to cheer about. We need somewhere in the range of 100,000 - 150,000 jobs per month just to keep up with demographic changes (the true number is likely on the lower end of that range). Thus, with 117,000 jobs we are essentially moving sideways. If we were at full employment, then adding jobs at a rate equal to population growth would be desirable. But we aren't at full employment, there are still close to 14 million people in need of employment, and moving sideways won't make any inroads into this problem.
There is some indication that the movement isn't literally sideways -- the recent trend shows some improvement. But the rate of change is very slow and at the present rates it will be years and years until we are back to full employment. And a key indicator of labor market health, the employment to population ratio, hasn't been improving at all (an indication we are adding jobs at a rate slower than population growth). It was 58.5 percent in March, and has now fallen to 58.1 percent.
For me, the report reduces but by no means eliminates the fear of a double dip. But it does nothing to reduce my fear that we are stuck below full employment with little hope that will change anytime soon.
Note, however, that the job creation numbers would look better if the government was not shedding jobs -- we would have created 154,000 rather than 117,000 jobs last month -- and it could have been even better if government job creation programs were (temporarily) employing people to do useful things for their communities, construct infrastructure, etc. These jobs aren't permanent, they are temporary "bridge jobs" to carry workers over and maintain aggregate demand until the private sector is ready to reemploy them on its own (this will happen faster aggregate demand is maintained through jobs programs, and keeping people employed reduces the many problems associated with long-term unemployment, problems that have permanent, negative effects on the labor force and the economy).
Policymakers have wasted enough time arguing over the debt ceiling, and the outcome of those negotiations made the employment problem even worse (recent movements in markets have shown that the agreement did produce a confidence effect, but it was the opposite of what was promised). If we want to do everything we can to help the economy get back to full employment, then policymakers must turn their full attention to the employment problem.
