With a third slowdown in three years, maybe the problem is the policies..
Well, this week makes it official. The weakest economic recovery since World War II has become weaker still, sinking into a spring slowdown for the third year in a row. Are we finally ready to debate a change in the policies that have led to this pass?
On Thursday the government reported that growth in the first quarter was 1.9%, even weaker than the 2.2% initial estimate. Then Friday delivered the third slower jobs report in a row, which qualifies as a depressing trend. Employers created only 69,000 net new jobs in May, and April’s total was revised down to 77,000 jobs. Stocks were crushed in the backwash.
The jobless rate of 8.2% marks more than three years of unemployment at or above 8%, despite an economy that ostensibly emerged from recession in July 2009. Few industries outside of manufacturing (up 12,000 in May and up by a robust one-half million since January 2010), transportation and health care saw job growth.
The rare good news is that the overall labor market expanded with 642,000 new entrants, and the labor force participation rate rose to 63.8% from 63.6% in April. This means that more workers have re-entered the job market, perhaps because they believe they can find a job or because their 99 weeks of jobless benefits have finally run out. The bad news is that 63.8% is still about two percentage points—about three million fewer workers—below the modern norm.
Even worse is the news that hours worked declined slightly, hourly earnings were up only 0.1%, and hourly earnings on a year to year basis are up a meager 1.7%. All of this means that income growth after inflation is stagnant.