The American economy gained a meager 187,000 jobs last month. We need 90,000 new jobs just to keep up with population growth, which means that net job growth clocked in at an even more meager 97,000 jobs. The headline unemployment rate ticked down slightly to 3.5%.
Overall, this is a weak but not catastrophic jobs report. There are no gotchas in the details, and the employment level increased by about 250,000, very close to what the jobs report says.
In somewhat better news, weekly blue-collar earnings increased 3.0% after adjusting for inflation. This is the third month in a row that they've gone up:
This is bad news for the Fed, which is obsessed with labor costs, but good news for workers.
I'm not sure "meager" is the right word. Can't we agree that the economy can't add hundreds of thousands of jobs every month indefinitely? What might be meager coming out of a recession could be robust when the economy is near full employment.
Sometimes we need to be open to positive news.
Came here to make this exact point.
There are times when "we added more jobs than people" is enough, and 3.5% unemployment is one of those times!
We've all gotten so used to the idea of an employment gap, there was very little (if any) time between the dot com crash and Covid that we were at full employment. But we're there now, or pretty darn close, and we can't keep adding net jobs forever - at some point, everyone who wants a job will have one.
Why is 3.5% 'one of those times'?
I remember the fairly recent past when nearly identical arguments were made at 6%, 5%, 4.5%, 4%, 3.8%, etc... At each point, certain people (almost always the same people) would declare that this was as good as it gets and we cant expect the job market to be any better without causing economic damage.
This viewpoint continues to be proven wrong....but now we should believe that 3.5% is finally the true ceiling that we must not try to push through?
It's important to remember that there are different kinds of unemployment. There's transitional unemployment, which is new grads who haven't found a job yet and people who recently quit, got fired, or took a hiatus; there's cyclical unemployment, where people are out of work because the economy is weak; and there's structural unemployment, where people are unemployed because of more stubborn issues.
Cyclical and structural unemployment are highly concerning and governments should try to combat them, but transitional unemployment is simply inevitable in any economy because the job hunt and hiring processes take time. Economists generally believe that 3% unemployment is the normal rate of transitional unemployment. "Full employment" doesn't mean 0% unemployment, it means an economy in which all unemployment is transitional.
I just dont believe there is any reason to think that suddenly we know that 3% is the just right rate of unemployment. Just like economists (and people pretending to be economists) were generally wrong about higher rates in the past being the just right rate at the time.
There are also 5+ million people (according to govt stats) who are not working, not counted as unemployed but would take a job if they could find one. You might be fine with these people on the sidelines, but I think its better if they could find a job since they want to work.
I agree that we cant get to 0 unemployed persons....but there is absolutely no reason to think we have landed on the perfect amount of people without a job.
Unlike 6%, 5%, or even 4%, 3.5% is pretty close to as low as we’ve ever gone. No matter how good the economy is, some people will be between jobs at any point in time, and as long as they can find another good job quickly, that’s a healthy labor market. And that seems to be where we are, or at the very least we’re close.
I’m not rooting for job losses! I’m glad we added more jobs than people. But I don’t think this report is weak because we didn’t add as many jobs as we did in 2021 when unemployment was much higher.
What constitutes as “good” jobs report is context-dependent, and Kevin seems to be ignoring that.
How strong do the jobs growth numbers have to be for you to consider it a “good” report? And how much does that number change depending on the unemployment situation?
This just isnt a compelling argument as its the exact same argument that was used to justify settling for 6% or 4.5% or 3.85%.
This same argument can and should be extended to 3% and 2.87% and 2.59%.
An even more important number is the people who are not captured as unemployed but report that they would work if they could find a job. These people should not be cast aside as expendible because the 'common wisdom' has settled on a new, arbitrary employment figure.
Job growth is clearly slowing the last few months. Many millions of people want a job but are out of the job market or want a full time job but are relegated to part time. Many millions more would like a more productive job.
This would have a different frame around it if the Fed wasnt actively trying to dramatically slow the job market. Its wrong headed to accept slower job growth as inevitable, or a mathmatical law.
You say that Kevin is ignoring the 'context', but thats also what you are doing. There is no mathematical rule or law of nature that wont allow for 250k+ or 325k+ jobs per month over the last quarter and ignoring the context of the US govt aggressivly trying to slow job creation is very misleading.
“ This just isnt a compelling argument as its the exact same argument that was used to justify settling for 6% or 4.5% or 3.85%”
I do not believe that any serious person said “6% unemployment is close to the best we’ve ever done”. That’s a laughably false statement.
I also am not advocating for “settling” for 3.5% unemployment. I’ll say for the third time that I am happy we are adding more jobs than people. Let’s keep doing that! If we start to go faster without a rise in inflation, I’ll be even happier! But given the balance of risks and how low the unemployment rate is currently, I think this is a healthy report, not a weak one.
“ Job growth is clearly slowing the last few months.”
No one is denying this. My whole point is that this makes sense in light of how many people are already working. Context is key.
“ ignoring the context of the US govt aggressivly trying to slow job creation is very misleading”
I am absolutely not ignoring the context that the Federal Reserve is employing a tight monetary policy. I disagree that they are trying to slow job creation - they are trying to make sure inflation continues to decline - but they themselves acknowledge (and so do I) that a trade off of this is lower job growth compared to that we would see with more accommodative monetary policy. And even with contractionary monetary policy, we’re adding more jobs than people! That’s pretty good!
Here in the real world, economic policy faces trade offs, imperfections, and humility about the limited control policy makers have over exogenous effects. Would I love everyone who wants a full-time job to get one? Yes! But in this economic environment, continued job growth above the rate of population seems pretty good.
I take from prior comments that you don’t think inflation was a problem the Fed needed to deal with, and I fundamentally disagree with you about that. Given my perception of your view, I could see why you think contractionary monetary policy is bad. But even in light of that, I think you’re stretching plausibility when you say we should be adding 3-4 million jobs a year even though unemployment is already quite low by any reasonable standard.
Yep, this. Clearly, the baseline should be the number needed for keeping up with population growth and changes in population composition. If we're still adding more jobs than needed to keep up with population growth AND the unemployment rate is low, then how is that "meager"? That should be very good news.
But I think KD's gotta keep doubling down on that "a recession is coming and the economy is bad" narrative, despite all evidence to the contrary.
Yes, this would be logical. Unfortunately, I think Kevin still has recession on his mind.
So Kevin’s chart shows Blue-Collar earnings are significantly higher than before the pandemic (adjusted for inflation). But he also recently posted that real wages were down since the start of the pandemic. Paul Krugman and Noah Smith recently linked to a tweet that showed that: Average real (inflation-adjusted) wages for Production/Non-Supervisory workers (>80% of US private sector workers) are 2.7% above Jan 2020 levels, and are at pre-pandemic trend.
https://twitter.com/arindube/status/1682048599452966915
A comment on one of Kevin’s inflation posts linked to a large reddit discussion about how food prices are continuing to rise. I usually roll my eyes when I see things like that because most people can’t figure out that they were paying a lot last year and the year before. Still, I just can’t tell if things are worse or better.
So are most people making more (adjusted for inflation) than before the pandemic or not? Is the working class doing OK? What about the middle class? What about the rich? I swear I’m less sure now than I’ve been in a long time.
Weekly earnings and hourly wages arent the same thing.
Way too often people (includint Kevin) use wages when they are making trying to make an argument about earnings.
Blue collar workers are definitely seeing one of the best economic stretches in recent memory. The Fed has made it very clear that this is actually a problem that needs to be stopped and some (perhaps Kevin) are using wages instead of earnings to argue that blue collar workers arent actually doing better therefore the Fed needs to be very cautious with their attemps to harm the labor market in an attempt to control price increases.
The Fed should be concerned about wages relative to GDP, not just wages in and of themselves. And they need to take in historical context too--the blue collar workers have been taking it on the chin for a while, so some closing on the income gap is certainly due. We are not seeing a wage-price spiral. Prices are up, first due to shortages and supply chain issues, then due to aggressive pricing strategies at large firms. Wages are not a big factor.
My understanding is that 3%, or thereabouts, is the level of unemployment at which all unemployment is transitional. Outside of an extraordinary situation, like a major war, it's neither possible nor desirable for unemployment to go lower. So "weak" net job growth isn't really anything to be upset about right now.
Just looked at 2019 job numbers - there were six months where job growth had a lower headline number than this one.
Rampell:
IDK why you're so doom and gloom, but I can see now why Biden is getting pummeled for a solid economy.