Recovery fail: Employment numbers continue to disappoint

Recovery fail: Employment numbers continue to disappoint

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Facts are difficult things. For the current recovery, growth has never exceeded 2.5 percent for any year. I

WASHINGTON, May 9, 2015 — The Bureau of Labor Statistics (BLS) just released employment numbers for April on Friday. By the numbers, the economy added 223,000 new jobs last month. The administration will claim that the low employment number in March was an aberration largely due to the abnormally cold winter, and that we have now returned to producing more than 200,000 jobs per month.

Is that good?

Not exactly. The recovery is almost six years old, which is longer than the average recovery has lasted in recent history. But the strength of this recovery is low. For the four years following the more severe 1981 recession, economic growth averaged about 4.5 percent. During the current recovery, growth has never exceeded 2.5 percent in any year.

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While the reported 223,000 new jobs created last month may appear to be a positive, the already-anemic March number was actually revised downward to 85,000, again possibly due to the bad weather, which  may have delayed some new hires. If we average these two months, the number of jobs created (150,000) is approximately equal to the increase in the size of labor force. For an economy that should be growing at a much faster pace, this is dismal news.

And it could actually be worse.

The numbers that are released are based on taking sample numbers and then drawing conclusions about the entire population. Sampling techniques are generally accurate, but some assumption must still be made.

For instance, in April and May and then to a lesser extent in June, July and August, the BLS makes what are known as “seasonal adjustments,” whose intent is to smooth out known seasonal aberrations in hiring in order to present a truer employment picture. The BLS adjustments in this case assume that between 100,000 and 250,000 jobs are added to the economy in those months due to seasonal hiring. This number is difficult to verify, so it may be higher. Or it may be lower.

The assumption is based mainly on the growth of the economy. While most economists believe the GDP growth will exceed 3 percent for the next two quarters, that may not be the case.

The first estimate of GDP growth for the first quarter of 2015 was 0.2 percent. That figure was estimated based on incomplete data for March. Now that the March numbers are in, the second estimate for GDP growth could show that the economy actually contracted in the first quarter. As a result, the estimates for second and third quarter growth are being revised downward. This could mean that the employment numbers for April through August will turn out to be overstated.

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Unfortunately, the Obama Administration is not helping the economy to create more jobs. Actions like the employer health care mandate, minimum wage hikes, and the dramatic increase in government regulations all serve to slow growth and reduce the number of jobs created.

A new proposal by President Obama will also reduce job creation.

Under current law, some employees receive an hourly wage while others, usually in a supervisory role, receive a weekly salary independent of the hours worked. The result is that salaried employees often work more than 40 hours per week. They do so because they understand this this commitment will lead to future opportunities within the firm. They also know that because they are salaried, when some hours of work are missed for various reasons, the salary remains the same.

For hourly employees, things are different. An hourly employee is only paid for the hours worked. The law generally says that if an hourly employee works more than eight hours per day or more than 40 hours per week, he is entitled to a much higher rate of pay.

READ ALSO: Jobs report continues to disappoint

The Department of Labor (DOL) has also set a minimum total annual wage for a salaried employee to be exempt from overtime pay. Obama wants to raise that minimum, noting that almost 10 million workers who currently are considered exempt from overtime would now be able to receive the extra income.

While that proposal would significantly help those workers, and while there are arguments to support that policy, the timing of this proposal is awful. Increasing labor costs to business at a time when we should be focusing primarily on growth will only serve as another drag on the rate of growth needed by the U.S. to break free of the Great Recession’s still lingering negative effect on the economy.

We all hope that the U.S. economy can start to grow at a rate that really adds jobs and opportunity instead of the current, persistently mediocre employment environment that we have come to accept. However, until the Federal government gets out of the way, it will be hard for the great American production machine to produce a large number of jobs.

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