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All this is undeniably good – no, very good – news that has been long in coming. As we went, it took us 10 years for our slow, steady recovery to take us to the point where we canceled most of the damage caused by the Great Recession.
That said, there were still some dark linings to this otherwise silvery cloud. The most important of these is the fact that while businesses added 263,000 very robust jobs last month, households told us that 103,000 fewer were working at the time. As you can imagine, these figures are usually quite close to each other because they are supposed to measure the same thing. (The reason we bother to calculate the two is that we use the first to give us the number of official jobs and the second to determine the official unemployment rate). Whenever there is a significant gap between the two, it tells us that things are probably not as optimistic as they might seem. This is very bad news when it's the second time it's happened in as many months. In fact, the business survey tells us that we created 452,000 additional jobs in March and April, but the household group reports that we lost 304,000 jobs over this period.
It is not surprising, given that all this is settled, to discover that the economy actually created about 150,000 jobs a month instead of the 200,000 we have been used to for so long.
How is it possible, however, for the recovery to slow when the unemployment rate fell from 3.8 to 3.6%? Well, it makes more sense once you realize that this only happened for the "bad" reason that fewer people were looking for work than more people found. That is why the wider unemployment rate, which includes people who have taken a job-search break or can only find part-time jobs and not the full-time ones they wish to do not have changed at all last month. In fact, it has dropped only 0.1 percentage point over the last eight months. Not to mention that the proportion of people aged 25 to 54 who should be of working age and who actually do so has slightly stagnated. He just fell for the second month in a row, bringing it back to what he was last October.
It is important to emphasize that this does not mean that the recovery risks degenerating into a recession. But if the economic situation is at the height of reality, some potential problems are hidden below. Which, when you think about it, is a pretty remarkable thing to say at this stage of the business cycle. Indeed, many economists thought that the recovery would begin to slow down once unemployment fell to 4 or 5%, simply because there would not be enough new workers to continue to grow as quickly – and that trying to maintain going beyond would only inflation. The idea that we could have an economy where prices go up by less than 2%, unemployment by less than 4%, and we still add about 150,000 to 200,000 jobs a month would have seemed whimsical.
So the question is whether the very idea that the economy would slow down once unemployment had fallen below a certain threshold was wrong, or if that threshold is simply lower than we thought. And the answer is that we have no idea. If you are a half full drink, you can emphasize that not only are hirings still solid today, but that wages are still low enough that there is every reason to expect to what companies continue to recruit so many people tomorrow. And that all the concerns that might arise at the moment are actually only an additional slowing down on the 3% unemployment path in the ever-linear process that is economic growth.
However, if you are a half empty glass, you could say that there are already signs that the recovery is starting to run out of steam and that unemployment may not be much lower than it already is.
But in both cases, the good news is that the Federal Reserve does not remove the glass. We must let the recovery take its course and not assume its future. And why would he? Failure to do so has already resulted in an economy characterized by the lowest unemployment rate in half a century. Who can say that he could not even do better than that?
There could still be a lot of titles to come.
This article was written by Matt O. Brien, a Washington Post reporter.
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