Nothing new under the labor market sun

The Bureau of Labor Statistics released new labor market data today showing that the U.S. economy added 209,000 jobs and that the unemployed rate ticked up slightly to 6.2 percent. Overall, the data show an economy continuing on its path of the past several years—a moderate recovery that is inadequate in light of the severity of job losses during the Great Recession.

The slight increase in the unemployment rate was due to an increase in the labor force and not a decline in the number of employed workers. According to the BLS household survey, the number of employed workers increased by 131,000 while the overall labor force increased by 329,000. This resulted in an increase in the labor-force participation rate to 62.9 percent in July from 62.8 percent in June.

The share of the population with a job, the employment-to-population ratio, was unchanged from 59 percent, still 4 percentage points below the most recent peak in December 2006. The ratio for the working age population (workers ages 25 to 54) slightly decreased to 76.6 percent from 76.7 percent.

The number of long-term unemployed workers (those without a job for 27 weeks or more) was essentially unchanged, according to BLS. This group continues to be a large share of the unemployed at 32.9 percent of all unemployed workers. The debate about the future of the long-term unemployed will continue. Some analysts, including economists at the Board of Governors of the Federal Reserve, claim that the long-term unemployed are getting jobs while others remain quite skeptical of the evidence.

Businesses added 209,000 total jobs during July, 198,000 coming from the private sector. The employment gains were less broadly based than in recent months. The diffusion index for private industries, a measure of how many industries added jobs, was only 61.9 percent in July compared to 65.3 percent in June and 64.4 percent in May.

Manufacturing added 28,000 jobs, and all of the gains (30,000) came from industries that manufacture durable goods. Specifically, 14,600 jobs came from the auto industry. Nondurable manufacturing industries shed 2,000 jobs in July led by food manufacturing (a loss of 3,600 jobs).

The data on wage growth, relevant to the current debate about slack in the labor market and the future of Federal Reserve policy, also showed little change. The year-on-year change in the average wage for all workers was 2 percent. Wage growth has hovered around this rate for the last year and shows no sign of acceleration. And the rate is well below its pre-recession level in 2007, which was closer to 3.5 percent.

The data released today show a labor market that continues to heal from the Great Recession. But the recovery continues to come up short given the damage done in the past. With wage growth still subdued and no sign that the long-term unemployed are locked out from jobs gains, policy makers should be skeptical of calls to pull back on growth-boosting measures. Overly cautious policy would not only leave our economy weaker in the short run but undermine our long-term economic growth potential as well.