The job market is better than it has been in decades. So why doesn’t feel good?
The U.S. Labor Department reported that there were 211,000 new jobs created in April, and at the same time lowered the nation’s estimated unemployment rate from 4.5 to 4.4 percent.
This is the lowest unemployment since December 2006, but things don’t feel like the booming economy of a decade ago. As the saying goes, the devil is in the details.
Each month, the Labor Department conducts two surveys of employment conditions, the establishment survey and the household survey. Each survey has different objectives and uses a different approach.
The establishment survey records total employment, hours worked and employee earnings. These data come from the payroll records of 140,000 nonagricultural businesses.
Unemployment rates are calculated from a much smaller household survey, providing an estimate of the total number of workers in the country and the percentage of that group that can’t find work (the unemployment rate).
The job increase for April in the establishment survey is the sixth monthly increase over 200,000 in the past year. There are more than 2 million more jobs in the U.S. this year than last year.
With all this job growth, the economy should feel like it’s booming. Unfortunately, details in both the establishment and household reports show otherwise.
First, the establishment report says workers in private companies are only averaging 34.4 hours per week, down slightly from the same time last year. Further, weekly earnings are up just 0.15 percent after inflation. It’s hard to see improvement when the amount of work is low and wages don’t keep up with inflation.
Second, the unemployment rate is at historical lows, but so too is the labor force participation rate. That is, those looking for work are having an easier time finding it, but fewer people are actually trying. This reduces potential demand and economic growth.
Businesses are hiring, but this is no boom. Until these same businesses have better incentives to invest and increase production, the economy won’t feel so good.
Peter Crabb is professor of finance and economics at Northwest Nazarene University in Nampa. firstname.lastname@example.org. This column appears in the May 17-June 20, 2017, edition of the Idaho Statesman’s Business Insider magazine. Click here for the Statesman’s e-edition, which includes Business Insider (subscription required).