The economy added 204,000 jobs in October despite the government shutdown and, in fact, beating economists’ expectations of 125,000 jobs. But news of the weakest labor participation rate in 35 years and memories of what a “normal” unemployment rate looked like (in 2006, it was 4.6%; today, 7.3%) can often confuse the picture of what is actually a positive report in today’s reality -- and understandably so.
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“People were thinking that there would be more of an affect from the shutdown, less confident, more hesitant,” said Josh Feinman, chief global economist at Deutsche Bank. “But it is a positive report, and it’s encouraging that the labor market is picking up a little bit of momentum.”
For many Americans, momentum in the job market seems to have little effect on everyday life. More than 8.5 million people lost their jobs between the beginning of 2008 and early 2010, and there are currently 11.3 million out of work -- 4.1 million of those for longer than 27 weeks. At 7.3%, the unemployment rate among 24- to 35-year-olds is higher than any other age bracket, with more people living at home and fewer first-time home buyers than in recent history.
But Chris Williamson, chief economist at Markit, a global financial services company, said that while it’s still a tough climate, the U.S. economy overall is showing real resilience, pointing to the 56,000 increase month-over-month in the jobs report. He said Markit has optimistic but realistic predictions for the rest of 2013.
"It’s encouraging that the labor market is picking up a little bit of momentum.... [but ] we dug a deep hole, it takes a while to climb out,"
“We forecast that in the next three months, the economy will continue to add 200,000 jobs or more monthly,” said Williamson.
Feinman pointed out that in the last three years the average pace of job growth has not been as bad as it may feel. According to the Bureau of Labor, in 2011, jobs grew at an average of 175,000 a month; in 2012, the number was 183,000; and so far this year, it’s 186,000 a month.
“We dug a deep hole,” said Feinman, “[but]…it takes a while to climb out, so the problem right now is we are just not generating enough jobs.”
Not generating enough jobs isn’t the only problem, according to the numbers. Another part of the report, which looks at the labor-force participation rate, a gauge of how many are working and how many are looking for work, has struck fear into many Americans.
In October’s report, the participation rate plunged 40 basis points to 62.8% -- the lowest since 1978 -- but Feinman says that worry is unwarranted.
“Don’t pay attention to the labor-force participation rate in this report,” he said. “The household survey data was skewed because of the shutdown.”
That may be true.
The jobs report is divided into two separate reports; household survey data and establishment survey data. In the October report, the establishment survey did not consider furloughed workers as part of the unemployed, while the household survey did. Feinman argues (and many agree) that by considering the hundreds of thousands of government workers temporarily out of work as unemployed, the household survey – which includes the latest labor-participation rate – is warped and therefore not a real indicator of anything.
“In the next report, I will be very interested to see the labor-participation rate,” said Feinman, who also pointed out that the aging baby boomer generation, now starting to retire, is partly to blame for the decrease in participation.
Either way, word on the street is still not as positive as many are reading into this jobs report said Carol Hartman, an executive search consultant at DHR International.
“I know this a more positive report than expected,” said Hartman. “But I don’t think this a roadmap that things are turning a corner.” Hartman says her clients are wary of healthcare reform and are not hiring until things are clearer.
“Many say to me, ‘We want to grow our workforce but we don’t want to just yet because of the unknown costs it will take to operate a business in the future.’ And I take a lot of that to mean they are waiting to see what happens with Obamacare,” said Hartman.
Looking at the report, private service-sector jobs are the growth leaders and in the next two months, stores may hire 720,000-780,000 seasonal employees, according to the National Retail Federation. But those jobs, of course, will only be temporary.
“I am just really tired of hearing every month the news coverage of the positive employment report,” added Hartman. “Because it’s not what I am hearing from clients and it’s not what I am seeing in everyday life.”