Despite its antiseptic prose, the Bureau of Labor Statistics (BLS) Friday press release on the employment situation was on balance positive. What was not talked about in the release was even more positive.
BLS reported nonfarm payroll jobs in March rose by 162,000, and the job counts for January and February were revised upward by 40,000 and 22,000 respectively. Though the March increase was less than expected, the cross-your-fingers picture was hailed by many as the long awaited turning point for jobs. Said President Obama, "We are beginning to turn around," adding it will take time to achieve strong employment growth.
Maybe not, Mr. President.
Three-fourths of the March increase was in the private sector, an encouraging sign, though some of the gain could be a bounce back from February's bad weather. The Federal government added 48,000 jobs, including temporary hiring for the decennial census. Census jobs will increase until summer, then peter out by fall.
Employment also improved in a number of goods and service industries, with an increased number of industries reporting job gains. The employment-population ratio, a measure of labor demand, rose for the second month in a row as did the labor force participation rate, signaling encouragement over job prospects among hopefuls waiting on the sidelines.
Average weekly hours and earnings in the private nonfarm sector ticked up last month, though hourly earnings fell slightly. Other negatives included no improvement in the March unemployment rate, still at 9.7 percent, and a sharp increase in those jobless for more than six months and in the number of involuntary part-time workers.
In the months ahead the official unemployment rate is expected to remain high or decline only slowly because of the influx of jobseekers into the labor market as opportunities improve. However, to focus only on the official jobless count is myopic - "hidden" unemployment will also be declining.
Promising as the March labor market report was, there were some positives not talked about in the government's press release.
The BLS count of discouraged workers, though not seasonally adjusted, last month registered its biggest month-to-month decline in the history of the published series, which goes back to 1994. The discouraged worker number fell by 210,000, more than triple the next largest change for March going back 16 years, and 20 percent larger than the change in any previous month. The only mention of discouraged workers in the press release was that their numbers were up from a year earlier.
Another eye opener not mentioned comes from the government's monthly household survey. The number of wage and salary workers in the private nonfarm sector rose by 505,000 last month, pushing the increase since last December to one million. These are hardly slow recovery figures.
When household survey employment is adjusted to the definition of employer-reported payroll jobs for greater comparability, and the effects of population control revisions are smoothed out, the increase in total employment since last December is even larger - an impressive 1.3 million.
Taken together, the employment picture from the payroll survey and the household survey adjusted for comparability tells us the labor market recovery so far this year has been stronger than we thought. If this strength proves sustainable - that's not a small if - we can expect to see officially measured unemployment, underemployment, and hidden unemployment restored to pre-recession rates in five years.
Employment growth is the key to economic recovery. As labor demand strengthens, consumer spending will improve, the recent sharp increases in productivity will ease, and the specter of inflation will once again rise up in the land.
The Federal Reserve is, if nothing else, alert. Now that employment has turned positive, expect to see more members of the Federal Open Market Committee saying, or dropping hints, that the federal funds interest rate should be raised in the near future.
Even though the labor market is catching fire and no longer needs costly government stimulus or other temporary fixes, the chair of the President's Council of Economic Advisers is still maintaining that more stimulus is needed, an indication of the dilemma that recovery poses for the Obama administration.
On the one hand, the administration would like to be able to take credit for having put Americans back to work. On the other hand, the President and congressional Democrats have been using weak employment to justify massive spending and intervention in the economy, both of which they would like to continue. If we do have fairly strong job growth between now and the November elections, expect them to play both sides against the middle, claiming that the labor market is improving, but not fast enough, and the government still needs to do more.
Alfred Tella is a former Georgetown University research professor of economics.
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