Jobless claims down in a stagnant job market

Unemployment rate down, so where are all the jobs? / Image:

WASHINGTON, July 10, 2014 — The Labor Department announced Thursday that about 304,000 people filed for first-time unemployment benefits last week. This is close to a seven-year low and down 11,000 from the previous week. The four-week average was 311,500.

The number of initial jobless claims hit a post-recession low of 298,000 in May.

The Bureau of Labor Statistics showed an increase in total non-farm employment of 288,000 for June, marking the fifth straight month of job growth exceeding 200,000 per month. At the same time, the unemployment rate fell to 6.1 percent. Combined with the drop in jobless claims, these numbers suggest a healthy labor market.

While the numbers are improving, the health of the labor market is not as robust as they suggest. Total non-farm employment is now just under 138.8 million, just 400,000 above its 2008 high. Total employment is 146.2 million, below its 146.6 million pre-recession high. That earlier high was achieved with a labor force of 153.3 million, compared to a current labor force of 155.6 million.

We should note that there is volatility in these numbers, and a flat comparison of two months across six years can be misleading. The Labor Department and other reporting agencies use a rolling average to smooth out the volatility. That caveat aside, though, the underlying point remains; current improvements come from a position of weakness, not of strength.

The labor force has grown by over 2 million since 2007, while total employment has just returned to its level then. Taking into account labor force participation, the picture gets worse.

Current labor force participation is 62.8 percent. Labor force participation in 2007 was 66 percent. The number of people working today is the same as it was before the recession, but it represents a smaller percentage of the population. The U.S. population has grown by about 15 million since 2007, and the population of non-institutionalized civilians of working age (16 to 65) has grown by about 8 million.

Employment has returned to its pre-recession levels, but the total number of employed people is drawn from a working-age population that is 8 million larger.

Rising job growth and declining unemployment claims are both positive indicators for the economy, but growth going forward does not seem set to erase the losses of the last seven years. That is, the number of national family members working has returned to its level of seven years ago, but the family has grown, and employment growth isn’t keeping pace.

GDP growth forecasts for this year have been cut to under 2 percent, and the labor market seems set to function with a larger permanent number of people out of work. This isn’t recovery; it is continuing stagnation.

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