A day hardly goes by that doesn’t offer the unexpected. Just when we thought the economy was rolling over to take a big fall something remarkable happened…
“Total nonfarm payroll employment rose by 288,000, and the unemployment rate fell by 0.4 percentage point to 6.3 percent in April,” reported the U.S. Bureau of Labor Statistics last Friday. “Employment gains were widespread, led by job growth in professional and business services, retail trade, food services and drinking places, and construction.”
The unemployment rate hasn’t been this low in over five years. On top of that, the number of new jobs created in April is the largest monthly increase since February 2012. Is it time to pop the champagne corks and celebrate the economy’s new found life?
“The report was not without pockets of weakness as wages stagnated and workforce participation matched a 36-year low,” said Bloomberg. “Nonetheless, job growth was broad-based and the hiring pace accelerated at factories, builders and service providers after households spent more freely as the first quarter drew to a close, showing the economy is perking up.”
Here at the Economic Prism we won’t bemoan the creation of 288,000 jobs. These numbers are nothing to sneeze at. However, the unemployment rate, given the ultralow labor participation rate, seems a bit suspicious to us. But, as in business and life, we take what we get…and we make the best of it…
Still, we must remember that many things aren’t what they appear to be on the surface. Sometimes it takes a scratch below for a whole new perspective to be revealed. Take President Obama, for instance.
He seems like a good enough guy on the surface. Someone well suited for running the local rescue mission or public library. But make him President of the United States and he’s transformed into an utter dillweed.
Before long he’s making decisions about what doctor you can see and his wife’s telling the school cafeteria what they can serve your kid for lunch. These are shortcoming we’d have never known about this couple if they weren’t living in the White House. Yet now they’re on display for all of us to more fully appreciation.
Like the President and the First Lady, the jobs numbers have some deficiencies that warrant further discussion. We’re not getting at the quantity of new jobs. Nor are we getting at the sagging participation rate.
Rather, what we are talking about is the quality of the new jobs and the treadmill. What we mean is if the number of new jobs goes up but the quality of the jobs goes down, then people are just running on the treadmill. As far as the economy’s concerned, people are not getting ahead. At best, they are running in place…though we have reason to believe many are sliding back…
Case in point, American incomes are not going up…they’re going down. A Sentier Research study showed that Americans are worse off today than they were four years ago, at the bottom of the recession. In fact, by Sentier Research’s estimation, household income is down 4.4 percent. Here are some of the study’s key findings…
“Based on new estimates derived from the monthly Current Population Survey (CPS), real median annual household income, while recovering somewhat from the low-point reached in August 2011, has fallen by 4.4 percent since the “economic recovery” began in June 2009. Adding this post-recession decline to the 1.8-percent drop that occurred during the recession leaves median annual household income now 6.1 percent below the December 2007 level.”
To clarify, the Sentier Research study was released last August. However, when we looked for a recent improvement in household income what we found is, that while there has been some improvement, the latest data showed a decline…
“According to new data derived from the monthly CPS, median annual household income in March 2014 was $53,043, about 0.7 percent lower in real terms than the February 2014 median of $53,435.” Moreover, this means, median household incomes are still down 4.4 percent from December 2007.
Alas, households have been running on the treadmill for five years straight and they have nothing to show for it…with the exception of, perhaps, frayed nerves, gray hairs, and a balance sheet teetering on insolvency. This is with the greatest amount of monetary and fiscal intervention into the economy the nation has ever experienced. Such is the plight of the new economy…work more, earn less, and never retire.
for Economic Prism