192,000 Jobs Added in March but Wages Fall
The economy created 192,000 jobs in March, down from 197,000 in February and still well below the pace needed to lower underemployment to respectable levels. Those mediocre results are consistent with a broadly underperforming economy.
Manufacturing employment lost 1,000 jobs and government stalled. Other than construction, which gained 19,000 employees, most new positions were in lower paying activities like leisure and hospitality, support activities in health care, retail, and temporary business services.
Hourly earnings fell, indicating good jobs continue to be scarce.
In 2013, GDP growth was only 1.9 percent, thanks to the $200 billion January tax increase and federal spending cuts, but after a slow first quarter, most economists expect the pace to accelerate to 3 percent by the second half of this year.
Improved prospects are raising home values, and President Obama is not likely to get from Congress the higher taxes in his budget proposal. Jobs creation is likely to be in the range of 200,000 per month; however, should the president get the higher taxes he wants, the situation would worsen.
Global growth is rebalancing from Asia to the Atlantic community, as Europe shakes off the worst of its sovereign and bank debt problems. This will reduce vulnerabilities to dodgy financial practices and economic nationalism in places like China, Japan, and Latin America.
Though the shenanigans on Wall Street—ranging from high-speed traders stealing from ordinary investors to the endless imagination of the casino gamblers at the big banks—continue to threaten financial stability, the Federal Reserve and other U.S. regulatory agencies are proving more diligent than during the Bush years.
This spring, more robust household formation should push housing starts above 1 million this year for the first time since 2007. The burdens of student debt require that many new dwellings be apartments, but surging residential construction will boost sales of pickup trucks so ubiquitous on construction sites, and employment in industries supporting housing and motor vehicles.
In February, unemployment was steady at 6.7 percent, and the percentage of adults employed or seeking a job—the so-called participation rate—rose slightly but remains well below pre-recession levels.
Factoring in adults on the sidelines who say they would seek employment if conditions were better and part-timers desiring full-time work, the jobless rate becomes 12.7 percent, and that likely understates the scope of the problem. One in six men between ages 25 and 54 are jobless, and many displaced spouses in formerly two-earner families have become reconciled to permanent unemployment.
The economy needs to add about 340,000 jobs each month to push unemployment down to an acceptable level, but that would require GDP growth in the range of 4 to 5 percent. Instead, slow growth and jobs creation pins down wages and frustrates the unemployed and new high school and college graduates.
Over the last four and one-half years, the pace of GDP growth has been a paltry 2.3 percent—about the same as during the Bush expansion. President Reagan inherited a much tougher unemployment situation than Obama, yet he managed 4.8 percent growth and created many more jobs.
The defining difference between the recent two disappointing economic recoveries and the strong record of the 1980s has been the predisposition of presidents from both parties to champion politically-expedient remedies—bailouts and entitlements that steal money from promising R&D, public infrastructure and private investment to bolster inefficient automakers and hospitals, abusive banks and traders, and decadent universities and other non-profits.
In addition, the failure to properly craft and enforce trade agreements with China, Japan, and Germany and to develop oil and gas off-shore and in Alaska has imposed a $475 billion trade deficit and lowers growth by two percentage points a year.
With a lighter but still effective touch to regulation, fewer entitlements that discourage job seekers and employers alike and recognition that America must play its strengths in a globalized economy, well meaning but ill-conceived economic policies will continue to beat down growth and the hopes and dreams of American workers.
Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and a widely published columnist. He tweets @pmorici1.