The U.S. economy added just 115,000 jobs in April, the worst month — by far — of 2012. Perhaps that’s just a blip. Perhaps the warm winter has been distorting the statistics. But no matter the explanation, after a strong beginning, the labor market recovery in 2012 has clearly softened.
Monthly jobs reports are noisy. The data jumps around. Economists tend to prefer a four-month average of unemployment numbers. So let’s do that.
In January, the economy added 275,000 jobs. In February, we added 259,000. In March, it was 154,000. So that’s an average of 206,000 jobs per month. To put that in perspective, that’s about the average monthly jobs pace of the best year during the 2000s (namely, 2005). But it’s not enough to get us back to full employment anytime soon.
The Hamilton Project has a new interactive tool that lets you see how long it will take to close the “jobs gap” under different scenarios. Essentially, this is how long it would take to bring unemployment back down to pre-recession levels, assuming that’s even possible, while still absorbing new entrants into the labor force. If we keep adding 206,000 jobs per month, then it will take 8 years and 2 months to reach what is considered full employment. Economists consider a jobless rate of from 4 percent to 6 percent as full employment.
Now, it’s very possible that April’s job numbers could be revised in next month’s report. One thing we’ve consistently seen with these jobs reports is that previous months are getting bumped upward. The Bureau of Labor Statistics originally said that the economy added just 120,000 jobs in March, but that got revised upward on Friday to 154,000. Still, even that big a revision for April wouldn’t change the overall trajectory very much. We’re still many years away from a thriving labor market.
Meanwhile, the unemployment rate bumped down slightly in April, from 8.2 percent to 8.1 percent. That was because fewer people were seeking work. This is a story we’ve been tracking at Wonkblog for awhile, and it raises a question: Is this fall in labor force participation natural — because Americans are getting older and more of them are retiring? Or are more and more workers getting discouraged by the shoddy labor market and opting out altogether?
A recent research note from the Federal Reserve of Chicago looked into this question and found that both explanations are true. About half of the decline in the labor force can be explained by demographic factors. Baby boomers are retiring, and fewer teenagers work nowadays. This would be happening even if the economy were healthy. But the other half is due to the slack in hiring.
As Mike Konczal of the Roosevelt Institute puts it, “It’s still the case that an unemployed person [is] more likely to drop out of the labor force than find a job.” And that’s not the sign of a strong recovery.