The Economy Is Still Hurting, Despite Strong December Jobs Report
James Sherk /
The Bureau of Labor Statistics’ December employment report showed robust labor market growth. The headline numbers show employers added 292,000 net new jobs while the unemployment rate remained constant at 5.0 percent. Delving deep, the details of the employment report also showed mostly good news.
The household survey reported almost a half million Americans (466,000) entered the labor force in December. As a result the labor force participation rate increased 0.1 percentage points. The employment-to-population ratio also increased 0.1 percentage points. Both measures remain at historically low levels, but last month they moved in the right direction.
The payroll survey showed widespread job growth in most industries. Professional and business services showed the largest gain (+73,000) followed by healthcare and social services (+53,000). The unseasonably warm El Nino related weather also spurred an increase in construction employment (+45,000). By contrast the largest job losses came in the mining sector (-8,000), attributable primarily to the continued drop in energy prices and consequent reduction in oil and gas exploration. Revisions to the payroll survey showed employers created 50,000 more jobs than previously estimated in October and November.
Average hourly earnings dropped 0.1 cent in December to $25.24 an hour. However, this drop came after several months of strong earnings gains. Over the past year average hourly earnings have grown 2.5 percent while inflation has grown only 0.4 percent. Real wages have thus grown an average of 2 percent over the past year – in line with historical averages.
Despite this healthy job growth, polling shows most Americans still consider the economy to be in mediocre shape at best. Two statistics in the jobs report shed light on why. The employment-to-population ratio for 25 to 54 year olds remained at 77.4 percent in December — still down over two percentage points from pre-recession levels. Considerably fewer “prime age” workers have jobs than before the recession began. Demographic changes like the ageing of the baby boomers cannot explain this weakness.
Furthermore, the average duration of unemployment remains stuck at almost 28 weeks – over six months. In the entire post-war era it never took jobless Americans this long to find work – until the Great Recession. Relatively few Americans are unemployed. But those who do lose their jobs (or re-enter the labor market) find it historically difficult to find new work.
The December jobs report showed strong economic growth, but the economy still bears painful wounds from the recession.