Weak job numbers? Don’t fret it.
The labor market is clearly changing, and despite what doomsayers say, these changes are likely for the better.
In September, the U.S. Labor Department said there were 142,000 new jobs created, and the nation’s unemployment rate remained steady at 5.1 percent.
Idaho employers are also adding new positions at a good rate, with more than 19,300 in nonfarming industries over the past year. The state’s unemployment rate of 4.2 percent falls below the national average.
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If the job market is growing, then why is the Federal Reserve holding interest rates low? And why are Washington policymakers complaining about an economic expansion that doesn’t create good jobs?
They might be missing an underlying change in the structure of the labor market.
Economic growth does appear weak when we look at the new job numbers alone. The increase of 142,000 jobs across the nation in September is below average. Businesses had been adding 198,000 new positions each month before this most recent report, and throughout 2014 the average number was 260,000.
The 5.1 percent U.S. unemployment rate, however, falls within historic norms. In a dynamic economy like ours, there are always some people out of work as old businesses close and new ones open up.
Today’s normal is different. As of September, another 3.7 percent of the labor force, or approximately 6 million people, are involuntary part-time workers.
It’s also true that many full-time employees are working less. The average workweek for production and nonsupervisory employees on private, nonfarm payrolls decreased last month by 0.1 hours to 33.6 hours, and is 3 hours shorter on average than in 1970.
Policymakers see these statistics as reasons to fret over the economy. They should see a silver lining.
First, more people enjoy part-time and freelance work. Young people in particular don’t like being tied down to any one job, preferring instead to work when and where they want.
Another change in the labor market is the proportion of working-age people who want to work. The Civilian Labor Force Participation Rate is now 62.4 percent, down 3 percent since 2000.
This helps business. Most companies simply don’t need many positions that used to be full time, such as human resource officers, network administrators and building maintenance personnel.
The second big change explains why fewer people are choosing to be part of the workforce. Much of this decline is explained by more would-be workers staying in school.
The workforce participation rate for workers 16 to 19 has fallen from 52 percent in 2000 to only 33.5 percent today. More students now finish high school and go on to college, a trend that will benefit the economy in the long run as workforce skills improve.
So don’t fret it. The Fed can raise interest rates and no new job programs from our government are needed. The labor market is simply changing.