Commentary on the February 2012 BLS Jobs Report

For many years now CPEG has been saying that the U.S. economy is not going to truly return to any semblance of full employment without a large scale federal public jobs program that could be easily funded with a modest financial transaction or “speculator” tax.

While data released this morning by the BLS shows a (seasonally adjusted) Nonfarm payroll employment increase of 227,000 in February 2012 from January 2012 from the (CES) “Establishment” survey and a Civilian Employment increase of 428,000 in February 2012 from January 2012 from the (CPS) “Household” survey, that in normal times would indicate adequate growth, this rate of growth is not likely to restore our economy to pre-Great Recession or “Lesser Depression” (LD) employment levels anytime soon.

First a little data. The figures below, which show percentage job (from the Establishment survey), and employment (from the Household survey), declines from previous peak employment levels for all 11 post war recessions with “month 0” designated as the official “trough,” or end month, of the recession according the NBER Business Cycle dating committee, demonstrates why this downturn is more aptly described as a “Lesser Depression” than a “Great Recession”.

As can be clearly seen from these graphs, the “Lesser Depression” that officially ended on June 2009 is completely out of the ballpark of all prior post-war recessions.

But these data actually understate the problem, as they do not take into account necessary job growth for new entrants. Based on a quick calculation from years immediately preceding the Lesser Depression, since December 2007, the U.S. economy would have needed a 113,000 a month employment increase just to provide jobs for new entrants to the labor force. The Figure below takes this into account:

As can been seen from the graph, in the over two years since the official end of the Lesser Depression, there has been almost no recovery of employment relative to December 2007 after taking into account new entrants to the Labor Force. Another way to look at this is via the “Employment to Over 16 Population Ratio” as shown in the Figure below.

In December 2007, 62.7% of the over 16 population were employed, but in February 2012 only 58.6%. While this may seem like a small percentage decline, it shows that over 10 million (10,029,280) more people were not employed relative to the population in February 2012 than the corresponding number relative to the December 2007 population.

And here’s the kicker; taking into account the roughly 113,000 new jobs that need to be provided every month for new entrants (at the average rate of employment increase of the last year of 209,500 jobs a month), it would take another 104 months, or 8 years and 8 months of consistent average employment growth at this level to get back to pre-Lesser Depression employment levels. But this is highly unlikely as we are already 32 months from the LD’s June 2009 official end date and the longest post war expansion on record (ending November 2001) was 128 months.

Without major and radical changes in policy, it appears inconceivable that we will have a true recovery from the LD. This is why it is a Lesser Depression and not just a Great Recession.

Among other things, no recovery will be possible without broad based real increases in income. This is not happening. The BLS reports that average hourly earnings for all employees in private non-farm payrolls increased by only 1.9% over the last 12 months, whereas January 2011 to January 2012 CPI increased by 2.9%, meaning that real income declined by roughly 1.0% over the period.

By the way, Sweden, which has among the most generous levels of public spending on social services and among the largest public sectors of all wealthy countries, also had the fastest growth rate of all wealthy countries.

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