A strong US employment report on Friday masked some lingering malaise. January saw 257,000 new private-sector positions created and the jobless rate falling further to 8.3 per cent. That’s good news for job-seekers and Obama fans. But labour force participation is well below 2007 levels and long-term unemployment is way too high.
Job increases last month were broadly spread, making for a justifiably positive reaction in financial markets. Even America’s construction sector added 21,000 jobs. Manufacturing, professional and business services, healthcare and the leisure and hospitality sector all added tens of thousands of jobs each, suggesting a job-creation machine finally beginning to fire on all cylinders.
Productivity data released on Thursday suggest robust job gains may continue. Fourth-quarter 2011 nonfarm labour productivity increased only 0.5 per cent from the last three months of 2010. That suggests the jobless recovery of 2009 and 2010, with outsourcing and rapid productivity gains, may have morphed into an expansion that involves more hiring, even if economic growth remains modest.
However, aspects of the data remain disquieting. Labour force participation, at only 63.7 per cent, is the lowest since December 1981 and nearly three percentage points below the 1998-2007 average. And, long-term joblessness at 42.9 per cent of all the unemployed remains close to its peak, far above the pre-2008 high of 26 per cent back in 1983.
This combination suggests that, for many people, jobs are not coming back soon. To some extent, this may reflect the exceptional downturn in construction, a sector that could eventually re-employ workers even after a long gap. But for some, the future may hold only long-term unemployment, followed by an exit from the official workforce. Even in a booming economy, that could make the traditional definition of full employment hard to attain.
