Have We Forgotten What a Jobs Recovery Looks Like?
It's important to keep one thing in mind as we scrutinize today's relatively discouraging jobs report: All the jobs numbers we've seen over the past four years have been far from what a recovery from a deep recession should look like.
The Labor Department reported that U.S. nonfarm employers added 88,000 jobs in March, bringing the three-month average to 168,000. The unemployment rate decreased to 7.6 percent from 7.7 percent in February, in large part because fewer people were looking for work actively enough to be counted as unemployed. The share of the population with jobs stood at 58.5 percent, still below where it was at the trough of the recession in June 2009.
The message is the same as it has been for a few years: The economy is recovering, but not nearly quickly enough to get the unemployed back to work before they lose their skills and drop out completely.
To understand just how meager this recovery has been, it helps to look at previous rebounds from deep recessions. After the double-dip recession of the early 1980s, for example, the three-month average payroll increase remained above 300,000 for an entire year, and at one point came close to 600,000. On that background, fretting over the difference between 100,000 and 200,000 seems almost petty.
One major difference between then and now is that many households are still struggling under the weight of debts taken on during the boom years. According to the research firm CoreLogic, more than 10 million homes were still underwater as of the end of 2012, meaning their owners owed more on their mortgages than the properties were worth. If the owners are responsible types, they're going to keep rebuilding their financial positions rather than go out and spend, no matter how much the Federal Reserve promises to keep interest rates low. Such deleveraging takes a long time, keeping businesses cautious and hiring low.
In such a predicament, it's not wise for the government to add to the pain by cutting spending, as it is doing under the terms of the budget sequester. With interest rates low, people needing jobs and infrastructure requiring renovation, now would be a great time to invest in public works. A longer-term plan to close the gap between the government's future obligations and revenue would also help restore confidence. We can’t just cut our way to recovery.
(Mark Whitehouse is a member of the Bloomberg View editorial board. Follow him on Twitter.)