The U.S. jobs report is out for April and it looks good, but don’t jump for joy just yet. The New York Times has dissected the facts and figures, and found that it looks much better on the surface than it does underneath. But how does one job report, with good numbers and data, have such a divisive message?
April Jobs Report
The latest jobs report has shown continued improvement in the economy, the type that makes the average person think we’ve finally gotten out of the recession. A cynic might say that it’s only one month and a much longer pattern of the same upward growth is needed; an optimist would say we have to take things one month at a time and it’s an excellent first step.
Unemployment Rate: Currently at 6.3% from 6.7% last year; in comparison, the unemployment rates of three of the hardest hit countries during the recession (Spain: 25.9%, Greece: 26.7%, Ireland: 11.7%) seem to show that the US is doing just fine. Job Additions: A total of 288,000 jobs were added, which is key because it’s the highest figure in two years and dwarfs March’s job growth of 192,000 and February’s of 175,000.
So with these two strong figures, two of the most important ones when it comes to evaluating the country’s economy, how can the New York Times possibly read anything bad into it?
Cue the Eerie Music
It takes a bit of reading between the lines, but what the Times has discovered is the labor force participation rate has cloaked the good news. The labor force participation rate, a fancy way of saying how many people are actively working, has decreased. In fact, it’s dropped by such a staggering amount — 806,000 — that it’s wiped out gains from all of February and March, and even some of January.
Adding to the doom and gloom is the unemployment figures: 733,000 fewer people reported being unemployed but they didn’t go out and look for new jobs, otherwise the labor force participation rate would have been higher. Read into it what you will, but that many unemployed people not back in the workforce says they’ve lost hope and given up.
Lastly, two crucial factors didn’t change at all in the April jobs report: number of hours worked and wages earned. As time goes on and inflation changes prices, wages have to also adapt or we won’t be able to afford basic goods. It’s like if you earned $10/hour 20 years ago and paid $1 for a loaf of bread, and bread has increased to $5 a loaf since then. It only took you six minutes of work to buy that bread, and now it takes you a full half hour. Either wages have to increase so you can afford the new price of bread, or you have to be given more hours to spend proportionally the same amount from your paycheck on a loaf of bread.
Citizens will always be debating about the merits of giving raises to workers (and who should get them) and where the minimum wage should be, but there’s one thing everyone can agree on: wages have historically risen, and risen for a reason.
Inflation is a bit like a runaway train where it’ll continue to occur, but it’s not always a bad thing. A bit of inflation in moderation is a sign that there’s more money coming into the economy (read this story for a better idea of how), and it helps keep money and value in check. But for inflation to keep being good, people actually have to be able to afford the increased prices of goods. If they can’t, there’s less money going into the economy and it’s not even been a decade since we saw how disastrous that can be on the economy.
Will the future be better? Of course. The economy — and jobs — doesn’t march along in a straight line, but ups and downs. We’re just coming out of a down right now and while there’s always the chance that it could drop even further, chances are we’ll probably go up for a bit.