There was a lot of hoopla that accompanied the April employment report, released last Friday by the Bureau of Labor Statistics. The economy added another 164,000 jobs and the unemployment rate fell to 3.9% – the lowest rate since December of 2000. Much discussion ensued in the media over the effects of “full employment.” Will there now be upward pressure on wages, prompting the Federal Reserve to raise interest rates? Where will employers find the workers they need? Will the shortage of labor constrain economic growth?
Less notice was taken of some not-so-rosy news in the report. Wages rose less than expected – only 0.1%. The labor force participation rate fell by 0.1%. And literally no one took notice of some even darker news in the report. The employment level (from the household survey) rose by only 3,000 after falling by 37,000 in March. And the civilian labor force has fallen by nearly 400,000 over the past two months, reversing much of the spike that occurred in February, and contributing to the drop in unemployment. Without that decline in the labor force, unemployment would actually have risen by two tenths over the past two months.
In fact, per capita employment has risen only twice in the past seven months – a two-month spike that occurred in January/February – and remains at exactly the same level as in September. And the number of unemployed has actually risen slightly.
The fact is that there remains a lot of slack in the labor force. An accurate reading of unemployment – one that grows the labor force along with growth in the population (instead of erasing people from the labor force if they give up looking for work) – has unemployment at 6.8% and U6 unemployment (a less reported measure that includes discouraged workers) at 12.0%. This Reuters article, contrary to the title of the article, admits as much – that the job market is “hot” only if you don’t count all the people who have been left behind.
The current expansion is among the longest ever and brought national unemployment to an 18-year low. Yet over 6.3 million are still out of work, many of them clustered in cities with chronic, high unemployment.
6.3 million people is the number that were unemployed before the “Great Recession” of 2008. It doesn’t even count the additional 5 million people who still haven’t been put back to work since then.
None of this is surprising. Though the Trump administration is making moves in the right direction with the process of renegotiating NAFTA (the North American Free Trade Agreement), with the imposition of tariffs on steel and aluminum, and with threats of a trade war with China, there has yet to be much in the way of meaningful results. Our trade deficit is as bad as ever. Further delay in progress on trade will risk a return to a stagnating economy.