The Ticker Quick Views on Politics, Economics and Finance
The Job Market Is Hardly Working
The job market is doing better. It's also not doing nearly well enough.
The Labor Department reported today that nonfarm employers added an estimated 236,000 jobs in February. That brings the three-month average to about 191,000, enough to accommodate new entrants to the labor force and even bring down unemployment. Appropriately, the unemployment rate slipped from 7.9 percent to 7.7 percent, its lowest point since early 2009.
What matters for the economy's longer-term potential, though, is what share of its population is actually working. The unemployment rate counts only those people who say they've been looking for a job. By contrast, the employment-to-population ratio -- which counts everyone over 15, out of prison and not on active military duty -- has held steady for the past three months at 58.6 percent, compared with an average of 63.3 percent in the 10 years leading up to the 2008 recession.
Why are so few people working? Some of the decline can be attributed to the aging of the U.S. population. More important is the damage done by the recession and painfully slow recovery. As of February, about 4.8 million unemployed people -- or 3.1 percent of the labor force -- had been looking for work for more than six months. That's down from a peak of 4.3 percent in mid-2010, but still much higher than in any recovery on records going back to 1947.
The longer unemployment lasts, the more people lose their skills and ultimately their motivation to look for work. As of February, an estimated 6.8 million people were out of the labor force even though they wanted a job. That's 2.8 percent of the civilian non-institutional population, up from 2.5 percent at the trough of the recession in mid-2009.
Getting those people back into jobs, as opposed to letting them drop out permanently, is crucial to bringing the economy back to health. Instead, Congress and the administration of President Barack Obama are subjecting the country to blunt and immediate spending cuts that, according to the Congressional Budget Office, will put roughly 800,000 more people out of work by the end of this year.
To get its debts under control, the U.S. needs to reduce the longer-term costs of entitlement programs such as Medicare and Social Security. To achieve the growth needed to facilitate that goal, the government should refrain from strangling the economy now, and instead provide some stimulus. What part of that is hard to understand?
(Mark Whitehouse is a member of the Bloomberg View editorial board. Follow him on Twitter.)