As economic growth completely stagnated in the first quarter – so much so that per capita GDP growth was actually negative – the monthly employment reports inexplicably continued to paint a picture of a robust labor market that was adding hundreds of thousands of jobs a month. Those reports didn’t mesh with other reports that showed the economy slowing, including corporate profits which have been slowing for the past year and worsened further in the first quarter.
It seems, too, that someone forgot to tell workers just how well the labor market was doing, since anger over the sorry state of the labor market has featured prominently in the races for both parties’ presidential nomination.
Finally, the employment report for the month of April, released yesterday by the Bureau of Labor Statistics, has begun showing cracks in its facade. It seems that the economy added “only” 160,000 jobs in April, well off expectations for another gain of over 200,000. And unemployment held steady in spite of the employment level falling by 316,000 jobs, thanks once again to 362,000 people vanishing from the potential labor force.
If it were an honest assessment of the condition of the labor market, the addition of 160,000 jobs to the economy would actually be pretty darned good news in light of the fact that it’s nearly twice the rate needed to keep pace with growth in the population. But it’s not an honest assessment and, for that reason, is a warning sign that the labor market is, in fact, not in good condition.
I’ve come to the conclusion that the monthly employment report may be one of the lousiest measures of how our economy is performing, thanks to decades of constant tinkering with the methodology that each administration does to put a good face on how the economy has performed. For example, if a company eliminates one full-time job and replaces it with two part-time jobs (a common tactic for eliminating benefits and cutting pay), that actually counts as the creation of one job, since two jobs were added while one was eliminated. Or, if you take a second part-time job in order to keep your head above water, you’ve just “created” a new job, even though no new work is being performed in the economy. So, as the economy has transitioned from full-time jobs to part-time jobs and temp jobs over the past few decades, employment appears to have grown while reality is exactly the opposite.
That’s the establishment survey portion of the report. Things are just as bad on the household survey side where it’s almost impossible not to be counted as employed. You don’t even have to earn money to be counted as “employed.” If you lose your job and, in order to make productive use of your time, you now help out someone in the family who’s trying to scratch out a living running a small business, you help them out for free, you’re counted as “employed.”
Another economic indicator that has become just as worthless is the weekly tally of first-time unemployment claims. Of course claims keep falling. Fewer people are eligible for unemployment as the economy has made this transition from actual, paid employment to one where people do things to scratch out a living that don’t fit that report’s definition of “employment.”
It’s all a big show where great employment numbers probably reflect a so-so economy and good numbers (like April’s) are actually a warning sign that things are beginning to tank.