A limping economy reflected in feeble jobs numbers and inadequate policy prescriptions. Those are the conclusions to be drawn from the Department of Labor’s March Jobs report and Fed Chair Janet Yellen’s March 31 speech in Chicago.
The March jobs situation illustrates the problems of a static economy which added 192,000 jobs, down from February’s 197,000 jobs. Unemployment was unchanged at 6.7 percent. Unemployment among African Americans rose over the previous month, from 12 to 12.4 percent, while Latino unemployment decreased slightly from 8.1 to 7.9 percent.
The largest employment increases were registered in Professional Services, 57,000 jobs; Food Services and Drinking Places, 30,000 jobs; Health Care, 19,000 jobs; and, Construction, 19,000 jobs.
Civil service, once a mainstay of the employment picture in our big cities continues to wither. Last month the federal government dropped 9,000 positions, as local governments added about 8,000 workers. Over the past year, federal government employment has fallen by 85,000 jobs.
The civilian labor force – the percentage of working age adults who are employed or looking for work – remains at a standstill. For March 2014, the figure is 63.2 percent, while in March 2013 it was 63.3 percent. The employment-population ratio of 58.9 percent is up slightly over March 2013’s 58.5 percent.
The long-term unemployed – those out of work more than six months – number 3.7 million. They represent 35.8 percent of the United States’ 10.5 million unemployed people who are looking for work. The average amount of time out-of-work Americans spend between jobs is now 35.6 weeks. Since extended jobless benefits were cut by the federal government four months ago, 2.3 million people have been without this support, along with their 1.2 million dependent children.
If the US economy is understood to require job increases of 150,000 per month to keep pace with population growth, then it is clear the economy is not presently capable of generating the work needed to convert the unemployed into wage earners. There simply don’t appear to be any indicators on the employment scene suggestive of an economy on the rise.
Under these circumstances, Janet Yellen was in the Chicago Political Economy Group’s hometown to put a shiny gloss on this bleak picture in a talk entitled ‘What the Federal Reserve Is Doing to Promote a Stronger Job Market.’
Yellen described a slack labor market where significantly more people are willing and capable of filling a job than there are jobs for them to fill. She pointed to the seven million people working part time who would like a full-time job, a figure substantially higher than expected given the official unemployment rate of 6.7 percent. Also, people are quitting their jobs at a rate below pre-recession levels because they know the next job will be awfully tough to find. Another element of slack is found in the high number of long-term unemployed. Finally, a labor force participation rate persistently below the pre-recession rate of 66 percent is further confirmation of slack.
Like any Fed Chair’s remarks, Yellen’s speech was peppered with messages to the financial sector, which needs constant reassurance that interest rates will remain bargain basement-low and that the central bank’s munificence will continue to flow its way. After being criticized for sending mixed signals after the Fed’s mid-March Open Markets Committee meeting, in Chicago Yellen sought to erase any confusion about the Fed’s position. Thus:
Recent steps by the Fed to reduce the rate of new securities purchases are not a lessening of this commitment, only a judgment that recent progress in the labor market means our aid for the recovery need not grow as quickly. Earlier this month, the Fed reiterated its overall commitment to maintain extraordinary support for the recovery for some time to come.
Those measures have produced a balance sheet, made up of bonds and financial assets purchased in financial markets that has grown to $4.2 trillion – all motivated said the Fed Chair, “to spur economic activity and create jobs.” These policies are not only failing to bring about an economic recovery, but could instead be moving us towards another financial crash, whose effects could be even more devastating than our experience since 2008.
Despite Yellen’s assertions, Fed and government policy have yet to adequately respond to the economic crisis in a way that involves job creation. Instead, March was just another month of increasing long-term unemployment, stagnant job growth and a near-zero increase in the civilian labor force.