The Labor Department is scheduled to release its monthly national jobs report at 8:30 a.m Eastern Time tomorrow morning, and I'll be on my usual dawn patrol to parse the data when it hits.
But in the meantime, here's a preview. The Bloomberg consensus of economists anticipates that 150,000 new jobs were added in May. That would be a moderate improvement over April’s 115,000 (which could be revised up, if the trend continues from the past few months). But it’s still well below the 200,000-plus level that we’d like to see, coming out of a strong fourth quarter in 2011 and an optimistic first few months in 2012. And it’s far below the 300,000-plus (really more like 400,000) we need to bring the unemployment rate down and restore the millions of jobs lost in the Great Recession.
Anyway, you're going to want to focus on three big numbers when the BLS releases the report tomorrow:
• The headline unemployment rate, which is now at 8.1 percent and, even if the report comes in at 150,000 or below, could fall to 8.0, because...
• ...the labor participation rate is terrible, at levels not seen since the early 1980s. Unemployment is falling not because of job growth but because people have been unemployed for so long, or think the economy is so bad, that they’ve quit looking for work.
• Finally, GDP, which isn't in the report, but which is part of the background data. We saw 3 percent GDP growth in the fourth quarter of last year, but we only got an average of 1.7 percent for the entire year. And for the first quarter of 2012, GDP was just revised down to 1.9 percent. It's deja vu all over again.
What's going on here is that the pattern of the last two years has reasserted itself: Things get off to what looks like a good start, then the economy stalls. Last year, for example, the Japanese earthquake and tsunami, along with the Arab Spring, brought the uncertainty that derailed a stronger recovery. But even then, were were only hoping for GDP growth in the 3-4 percent range, optimistically.
For comparison’s sake, a “normal” recovery from a “normal” recession should deliver 5-6 percent GDP growth.
I call this “stuckflation,” riffing on 1970s-style “stagflation.” The difference between then and now is that while we have high unemployment and sluggish growth, we don’t have high inflation.
Lately, a lot of folks have zeroed in on the labor participation rate, as evidence that the US economy can’t deliver “full employment” at historic levels. We may have to get used to a period of 6 percent unemployment as the New Normal. Some are also noting that the labor market isn’t functioning properly, matching job seekers with employers (and more on that in a follow-up post).
For California, this is all bad news. Many metro areas in the state are still running double-digit unemployment. In El Centro, MORE than 1 in 4 workers is unemployed.
In L.A., it looks like our unemployment rate has been falling due to people dropping out of the labor force, but the good news is that because we have such a large and diversified economy, some of the decline in our unemployment rate over the past few months could be due to some hiring at small businesses. That can lag the national jobs data.
Bottom line: It should be a gloomy morning tomorrow, and it could even surprise, unpleasantly, to the downside. I think it’s a bit of a coin flip as to whether the markets will drop on this news or whether they’ve already gotten used to sluggish growth and are more worried about the euro crisis.
As for the actual number, I think we'll do well to get 100,000 new jobs. I just don't like that 1.9 percent GDP figure.