Can we finally take the 'jobless' out of 'jobless recovery'?

Recent reports nationally and in Washington seem to indicate real job growth, but uncertainties about the economy remain.

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Recent reports nationally and in Washington seem to indicate real job growth, but uncertainties about the economy remain.

Statistically, the economic recession that officially began in December 2007 has been over for more than a year — gross domestic product is now rising at about 2 to 3 percent a year. GDP was rising at an annual rate of 2.8 percent in the fourth quarter last year — and most economists believe that pace of growth will continue for the rest of this year. Even the Federal Reserve upped its forecast for the rest of the year recently, to a range of 3.3 to 3.9 percent.

The recession lasted 18 months, which made it the longest of any recession since World War II. Previously the longest postwar recessions were those of 1973-75 and 1981-82, both of which lasted 16 months.

Employment reports of the past few weeks seem to point toward a move beyond the "jobless recovery" that has made any economic improvement an illusion to many unemployed workers. State officials said in their first report for 2011 (issued March 1) that the state economy produced more than 11,000 jobs in January, getting the year off to a good start. The unemployment rate dropped to 9.1 percent that month, from 9.3 percent in December.

Last Friday (March 11), the national report for February was equally upbeat. More than 190,000 jobs were added nationwide in February, and the unemployment rate dropped below 9 percent — to 8.9 percent — for the first time since last summer, when a positive blip turned out to be cause for false enthusiasm.

While the numbers are good on the surface, there is still a long way to go before the so-called jobless recovery is even statistically over, and longer still for it to be a memory for many individuals and groups. For some, like older workers and those without at least a high-school education, the recession will remain painful for some time to come. The length of unemployment for a worker over 55 is now more than 45 weeks. 

Economic statistics always seem to have a “yes, but” element to them. The jump in February employment is tempered by the fact that January was a particularly slow month mainly because of the severe winter weather in much of the nation. Taken together, January and February are not that much better than a year ago. 

A Crosscut commenter on one of my recent economic stories had a good idea: Just do the math. So the national economy lost about 8 million jobs in the downturn. That means the improvement we saw in February would have to continue unabated for nearly four years to even get us back to where we were before the recession. Taking January and February together pushes the date out more than five years. 

The same is true here. The growth of 11,000 jobs in January was great 11,600 jobs added in the private sector and 600 lost in the public sector for the overall gain. But take the average for December and January and the total gain shrinks to just more than 6,000 jobs. With 340,000 unemployed, it would take more than four years to put everyone back to work.

And that’s just getting back to where we were. It does not begin to account for the new jobs needed to accommodate the natural growth in the workforce — the new workers coming of age who want to work. Mark Zandi, chief economist with Moody’s Analytics, told Congress last summer that consistent job growth of more than 150,000 positions a month is needed to reduce unemployment.

Earlier this week, the state Employment Security Department released unemployment figures for the counties of the state. Starting with this month’s release, county unemployment rates and employment data are being released the Tuesday after the state numbers are released. The Employment Security Department said the federal Bureau of Labor Statistics (BLS), wants more uniformity in how the states report their labor statistics. So it will no longer allow Employment Security to release preliminary county-level data on the same day as the state data.

The numbers here are a bit more sobering as well since they are not seasonally adjusted. King County’s rate is 8.4 percent compared with 8.3 percent in December. Snohomish County is at 10.1 percent vs. 9.8 percent, and the Tacoma/Pierce County area is at 10.4 percent vs. 9.1 percent in December.

The state’s 8.9 percent rate, reported March 1, is seasonally adjusted. That’s an important concept to keep in mind when looking at these kinds of numbers. Seasonal adjustment is a way of smoothing out the usual peaks and valleys in any statistical economic series. This time of year, for example, because of weather conditions, road construction slows, there are hardly any logging operations and most food-processing employment is at a low point.

During the holiday season, retailers hire more people for a few weeks, and then drop them in January. Jobless rates typically fall in December and rise in January. Economists take historical figures for various industries, try to figure out what regular patterns exist, and then adjust rates to match the patterns. That’s seasonal adjustment.

So, just where is the economy?

The honest answer is no one knows for sure. Oil prices are surging and gasoline is nearing $4 a gallon. In the past that price has usually been the tipping point for people changing behaviors because of high gas prices — more taking the bus, delivery prices rising, and so forth. All have an impact on the economy.

The continuing budget problems of state and local government also is a factor. The BLS said in its March report on national unemployment that the “local government” category has lost 377,000 jobs since its peak in September 2008. In this state, in just the past year alone (January 2010 to January 2011), government showed a loss of 3,800 jobs, second only to construction (down nearly 10,000 jobs).

There are positive signs. Manufacturing is up, with Boeing a good example of a company adding jobs — though not as many as in past cycles — as production increases. There was the headline about the other day and its openings for 1,900 workers, though nearly half the openings are for tech-savvy workers.

Nonetheless, Washington still ranks relatively high when the “alternative” measures of unemployment are used. The Bureau of Labor Statistics’ U-6 rate, which is the most inclusive including groups called discouraged workers, marginally attached workers,  and workers who are working part-time for economic reasons, was at 18.1 percent in the last report, little changed from the previous report. Washington was lower than California and Oregon, yet higher than Alaska, Idaho and Montana.

Employment Security said the gap between the basic seasonally adjusted unemployment rate — 8.9 percent in January — and the more inclusive rate has increased more for Washington than for the nation.

“The implication is that the ranks of discouraged workers, marginally attached workers, and those working part-time involuntarily in Washington have risen even more dramatically than the number of unemployed,” the department reported.

Keep in mind that these monthly reports are snapshots, quick views of what is happening. Important, yes, although more important to the daily movements of the stock market (pay little attention to this by the way) and to the politics of the situation. There already is talk about what the unemployment rate has to be in 2012 to influence the presidential election.

Even we ordinary, amateur economists can get a better handle on numbers by smoothing out the peaks and valleys. For job growth, a three-month rolling average might be the best way to view what is really happening in the economy.

For Washington state, the rolling three-month average (November, December, January) shows a gain of 4,400 jobs per month. The three reports have increased each month with a strong increase in January — the largest jobs total in three years. Nationally, the rolling three-month average (December, January, February) shows a gain of 135,000 jobs — not that far from Zandi’s job-growth base. The December and January job-growth totals were revised upward.

So maybe, just maybe, things really are looking up. Or, as one reporter speculated in the past week, we’re just where we were last year when things were starting to look up, only to slump once again. Now oil prices, the situation in the Middle East, the disaster in Japan, a continued weak housing market, federal shenanigans around the budget and debt ceiling — and who knows what else — could derail the economy again.


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About the Authors & Contributors

Stephen H. Dunphy

Stephen H. Dunphy

Stephen H. Dunphy writes on business and economic issues for Crosscut. He was a business editor and columnist for a number of years at The Seattle Times.