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The July report projected that over 200,000 new jobs were created, but this number doesn’t mean that the economy is doing fine, or that workers aren’t suffering.
On the surface, recent federal job reports have provided plenty of fodder for those optimistic about the Biden administration’s performance to seize upon.
The Bureau of Labor Statistics’ report for the month of June, for instance, had 206,000 new jobs added to the economy, marking three and a half years of positive monthly job growth. But while this figure might seem like good news, the fine print hides a lot of worrying details for American workers.
Unemployment in June surpassed 4% for the first time in nearly three years, increasing by 0.1% from a month before. This change is part of an unemployment trend that has been growing for over a year. Furthermore, wage gains decreased, although they still slightly outpace inflation – a marked improvement from the worst days of 2021-2022.
Even the figure of 206,000 new jobs is somewhat misleading, write EJ Antoni and Peter St. Onge. For starters, one-third of those jobs were created in the public sector, and so the number of jobs created does not equate to the amount of wealth created. Public sector employees are a net drain on economic resources, and a ratio of two private sector jobs for each public sector job might not be enough to break even.
Additionally, even many of the jobs that have purportedly been created in the private sector have come about as an indirect result of taxpayer funding, such as government grants to businesses. These types of jobs also have hidden costs which frequently offset any economic benefits they may provide.
The problem is compounded even further by the fact that many of the jobs included in the June report are part-time jobs. Fully 30,000 full-time jobs were replaced by part-time jobs in June. If a person gets fired from a full-time job and is forced to take two part-time jobs to survive, this will be counted as the creation of a new job, even though it typically signifies a much worse outcome for the worker in question.
When discussing job creation and unemployment, there is also a perennial caution to be made: the unemployment rate only counts people who are actually looking for a job. When someone becomes so discouraged about the prospect of getting hired that they drop out of the labor market entirely, they are not counted, even though such people may well be the ones suffering the most economically.
This is precisely the situation we find ourselves in, Antoni and St. Onge write. The rate of job market dropouts has increased radically in recent years, particularly in the aftermath of the pandemic and the government’s drastic response. There are probably several million such “missing workers,” and if they were counted in the unemployment rate, it would dramatically increase, perhaps even double to around 8%.
Yet even the unemployment rate on paper is concerning. As Antoni and St. Onge point out, it triggers the so-called Sahm Rule, by which, if the three-month average unemployment rate is more than half a percentage point above its low in the last twelve months, a recession is likely. Since the Sahm Rule is one of the most durable economic indicators in recent history, this may well indicate that dark economic days lie ahead.
All this is a reminder of the uncomfortable truth that, like many economic metrics, a jobs report is only one part of the larger picture and cannot be taken on its own. Such upbeat soundbites often hide a dismal reality that all too many workers and families are feeling right now, which is why recent polls show that less than a quarter of Americans have a positive view of the economy.
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