- The Washington Times - Friday, March 5, 2004

Despite sustained expansion in economic output over the last three quarters of 2003, during which gross domestic product increased at an average annual rate exceeding 5 percent, the U.S. labor market remained weak at year’s end, as we all learned yesterday.

The February employment report revealed that payrolls increased by 21,000 jobs. Several caveats made that figure disappointing. First, January’s employment estimate was revised downward by 23,000 jobs, meaning that February’s nonfarm payrolls totaled 2,000 jobs fewer than the figure initially reported for January. (December employment figures were revised downward as well.) Second, the effect of the downward revisions reduced January’s tepid job growth below 100,000 to 97,000. That means that there has not been a single month in which nonfarm employment has increased by 100,000 jobs since February 2001. This, despite the fact that the 2001 recession ended 27 months ago.

Third, the reported increase of 21,000 jobs for February occurred in the government sector. That means that net private-sector job creation last month was zero. Fourth, the downward revisions for January and December, combined with February’s disappointing numbers, mean that employment has now grown by an average of only 42,000 jobs per month during the past three months. Fifth, while employment has grown during each of the past six months, only 364,000 jobs have been generated over this period.

By the 27th month following the end of the 1990-91 recession, whose aftermath was widely characterized as a jobless recovery, more than 2.1 million jobs had been created. In contrast, last month’s nonfarm payrolls were still nearly 750,000 jobs below the level that prevailed at the November 2001 trough 27 months earlier.

Meanwhile, the unemployment rate remained steady last month at 5.6 percent, having fallen from the cyclical peak of 6.3 percent reached in June. That is only 1.3 percentage points above the 4.3 percent unemployment rate that prevailed when the recession began in March 2001. Given the failure of the current recovery to generate jobs commensurate with previous expansions, why has there been such a relatively small increase in the unemployment rate? The answer: The labor force participation rate fell below 66 percent last month for the first time since 1988. If the civilian labor force participation rate were at the same level (67.1 percent) it was in March 2001, last month’s unemployment rate would have been 7.3 percent, fully 3 percentage points above the rate when the recession began three years ago.

LOAD COMMENTS ()

 

Click to Read More

Click to Hide