Today’s jobs report is very disappointing. Essentially the labor market is stuck in neutral, yet unfortunately there’s little political will to do much to get it back into gear.
The US economy added only 142,000 jobs last month, compared with economists’ estimates of about 200,000. That put the average gain over the past thee months at just 167,000 – down from an average of 260,000 in 2014. Meanwhile, the official unemployment rate stayed steady at 5.1%.
Here’s why being stuck at this pace of growth is not adequate. At this rate, it will take another three years to get back to the level of employment that existed before the start of the Great Recession. We’re still missing a little more than three million jobs that were lost during the financial crisis.
A look at the overall numbers gives more reason to be concerned. Long-term unemployment remains stuck at 26.6%, and labor force participation rates fell at a time when they should both be growing if people who have given up looking for work see more good prospects for finding a job. Nearly every industry experienced lower job growth in September than in prior months, while one-third of the new jobs are in the low-paying retail and food service industries.
Being stuck in neutral also has a political liability. The numbers are probably not bad enough to scare Congress into doing something to accelerate job growth. Instead, we will stay in the doldrums while we watch our human capital base stay under-utilized for a long time to come.
Another impact is on the timing of a Federal Reserve increase in its target interest rate. The Fed’s policy-making committee declined to lift rates as many had expected last month, but Chairman Janet Yellen sent a strong signal last week that it would happen sometime this year – most likely at either its meeting later this month or in mid-December.
This would be the wrong call. The sluggish jobs growth shows it’s still too early to begin the “return to normal” in terms of interest rates. Some reports suggest the latest figures will stay the Fed’s hand in October, but even December will probably be too soon.
Perhaps the only good news in these numbers is that they will keep the issue alive on the campaign trail for both Democratic and Republican presidential candidates. With any luck, it might spur them to get more specific about how to turn the labor market around.
There is no secret about where to start. The consensus among economists is the two best investments for creating good-quality jobs and getting a long-run positive return on investments are education and infrastructure.
Maybe it is time for the American public to say to both Congress and the candidate: lay out a specific plan of action and get working on it now, or we will keep looking for other “outsiders” to do the job.