U.S. economy trims unemployment, but more jobs growth needed
The most recent numbers on U.S. unemployment released today by the Bureau of Labor Statistics indicate that our economy is putting the Great Recession further in our rearview mirror. But more needs to be done to ensure stronger employment growth up and down the income distribution.
The U.S. economy added 288,000 jobs in June 2014 and the unemployment rate fell 0.2 percentage points to 6.1 percent, according to the most recent BLS data. The labor market added 272,000 jobs on average over the past three months and the unemployment rate declined by 1.4 percentage points over the past year.
These gains in employment were broad based as every major industry group except for two categories, nondurable goods manufacturing and other services, added jobs. The diffusion index, a measure the BLS produces to show how many industries are adding jobs, increased to 64.8 percent in June from 62.9 percent in May.
Previous drops in the unemployment rate have been troubling because they were primarily due to a drop in the labor force, but in June, the labor force participation rate was steady at 62.8 percent.
The drop in the unemployment rate this time was due to an increase in employment (407,000) along with an increase in the labor force (81,000) and the total population (192,000). The share of the population with a job increased very slightly to 59 percent from 58.9 percent. The increase was slightly larger for workers between the ages of 25 and 54— prime-age workers who are too old for school and too young for retirement—going up by 0.3 percentage points to 76.7 percent.
While these gains are promising, the state of the labor market is far from strong. The employment-to-population ratio remains almost 4 percentage points below December 2007 level of 62.7 percent. Similarly, the ratio for prime-age workers remains 3 percentage points below its pre-recession level. The labor market may have more jobs now that it did before the Great Recession of 2007-2009, but the population has increased by 14.7 million since December 2007. And there appears to be considerable slack in the labor market because wage growth has yet to accelerate.
The risk to our economy is that the current recovery is not moving with enough speed. If the current share of prime-age workers with a job becomes the new standard, then the long-run growth rate of the economy is at risk. With fewer productive workers adding their skills and talents to the economy, the economic potential of the U.S. economy will decline. The result would be a less prosperous future.