The official United States employment numbers for February have come out, along with figures revised downward for both January and December. Although I think by far this Reuters story is the best coverage, here is the Associated Press version. This one from CNN includes a pretty graph. This one from The New York Times admits some of their “reporting” was contributed by the Associated Press. For the hard core financial news junkies, don’t forget Bloomberg. In short, 21,000 jobs were created — an average of 420 per state — falling far short of the 125,000 jobs that economists expected.
Both sides of the political spectrum are concerned about these numbers. Democratic heir apparent John Kerry says there is one more guy who needs to lose his job, and that man is George W. Bush. On the other side, we have Treasury Secretary John Snow, who called the number “disappointing.” He went on to say this was why we needed to make the Bush tax cuts permanent.
Do not be fooled by those who say “Unemployment is still only 5.6%. Back in the Clinton Administration we considered that low. What is your problem?” Problem one is that the unemployment rate doesn’t really mean that much. It only measures those who had a full time job, lost it, are looking for a full time job, are receiving unemployment benefits, aren’t going back to school, aren’t temping, aren’t taking part time work to make ends meet, aren’t giving up, aren’t declaring themselves an independent contractor. Think about the adults you know. Would you say more or less than one in twenty is unemployed? How many of them are underemployed? Even Alan Greenspan says it is more accurate to measure the people actually getting paychecks.
These disappointing jobs numbers are important for several reasons, which are outlined particularly well in the Reuters and CNN articles above. First, in order to keep up with people just entering the job force, the economy needs to add roughly 150,000 jobs each and every month. Yes, if we don’t add those jobs, the new people don’t count as unemployed because they never were employed in the first place. In fact, the experts would really like to see a consistent 200,000 to 300,000 jobs created monthly before they declare the job market “good.” Even at that rate, it will be a long while before the 2.3 Million jobs lost over the last 3 years are replaced.
Not only were there 24,000 fewer construction jobs. Manufacturing jobs declined for the 43rd month in a row. Even the much ballyhooed service sector, the sector that would save us all, has not produced the expected jobs. In fact, the second paragraph of the Reuters article above points out that private job growth was flat; the 21,000 new jobs were all in Government.
Oh, and the 8.2 million unemployed people — and I hope they are all registered voters — have on average been unemployed over 20 weeks, the highest level in decades. Think about that. On average, 5 months unemployed by the very strict Government definition. Many of these people are close to exhausting their unemployment benefits and perhaps their savings too. This is to say nothing of how demoralizing it is to be out of work for months on end. No wonder there are so many “discouraged workers,” people who no longer count as unemployed because they have given up looking for work.
As if that were not reason enough to consider this number important, it also means that Greenspan cannot raise interest rates. The Fed Funds rate sits at 1%, the lowest level since 1958, a rate the Fed has already said is unsustainable. For reference, the Bank of England has rates set at 4%. This low, low interest rate helps anyone looking for a mortgage, anyone with debts they can refinance, but has been almost completely ineffective at it’s stated goal: spurring business investment.
The final reason this number matters may have escaped your attention altogether. You will hear it glossed over in the news, with statements like “The Dollar dropped against the Yen/Euro on sluggish jobs data.” The Administration is letting the Dollar drop against other currencies, on the theory that it will make American goods cheaper overseas, thus stimulating job growth. Of course, the fact that it makes imported goods more expensive in the middle of a huge trade deficit just means we will all have incentive to “buy American,” right? Wrong. One of several reasons gas is so expensive these days is that crude oil is bought and sold in dollars. With the dollar this low, the members of OPEC have trouble making money on oil, as they have to pay their oil-field workers in local currencies. Therefore, they are cutting production and forcing prices up. As a strict aside, oil and oil services companies (such as Halliburton) have historically made more money when crude oil prices are high.
It’s tough to fill up the car to get to a job interview with gas prices near record highs.