For the third consecutive month, the Labor Department reported disappointing numbers for job growth in the nonfarm sector of the economy. June nonfarm payroll employment, the department reported Friday, increased by only 121,000 jobs. That was well below the median projection of 200,000 jobs, which was based on a CNBC survey of two dozen economists. May payrolls increased by only 92,000 jobs, which followed an increase of 112,000 jobs in April. Altogether, job growth during the second quarter was a disappointing 325,000. That was the lowest quarterly increase since the third quarter of 2003, when the U.S. economy finally began generating job growth after shedding more than 2.75 million jobs since February 2001, the month before the beginning of the 2001 recession.
The U.S. unemployment rate remained 4.6 percent in June, its lowest level since July 2001. The White House understandably emphasizes the low unemployment rate. But even that statistic is subject to a major caveat, which partly explains why President Bush’s approval ratings on the economy have failed to track the improvement in the unemployment rate. Officially, the unemployment rate has fallen from a cyclical peak of 6.3 percent (June 2003) to 4.6 percent (May-June 2006), which is less than half a percentage point above the 4.2 percent rate that President Bush inherited in January 2001. However, in that month, 67.2 percent of the U.S. civilian noninstitutional population (16 years and older) were members of the labor force, which meant they were either working, on the one hand, or unemployed and looking for work, on the other. Last month, this so-called labor force participation rate was 66.2 percent. If it were 1 percentage point higher (i.e., equal to the participation rate in January 2001), the June 2006 unemployment rate would have been 6.1 percent. Moreover, instead of 7 million workers reported by the Labor Department to have been unemployed last month, 9.4 million would have been reported unemployed.
The White House also emphasizes that more than 5.4 million jobs have been created since August 2003, when nonfarm employment reached its post-recession nadir. When that figure is put in context, however, it is not nearly as impressive as it sounds. Specifically, the net increase in payroll employment since August 2003 has averaged 160,000 jobs per month. In contrast, throughout the entire 96 months of the Clinton administration, nonfarm employment increased by an average of 237,000 jobs per month. Compared to the 12-month average of 1.92 million new jobs that have been created since August 2003, the average annual number of jobs created during the eight-year Clinton administration was 2.84 million, which is nearly 50 percent higher.
Through June 2006, there has been a net increase of 2.76 million jobs since Mr. Bush entered office. More than 40 percent (1.13 million) of those jobs have been in the government sector. Thus, there has been a net increase of only 1.63 million private-sector jobs (less than 60 percent of the total increase in jobs) since January 2001. In other words, on average, 25,000 private-sector jobs have been created each month since January 2001. During the Clinton administration, private-sector nonfarm employment increased by an average of 217,000 per month. (More than 91 percent of the total jobs created during the Clinton administration were in the private sector.)
Average real (i.e., inflation-adjusted) weekly earnings of the 80 percent of private-sector workers who are employed in a production or nonsupervisory capacity (roughly 91 million workers) have increased by less than one-quarter of 1 percent since January 2001, according to the Labor Department. Average real weekly earnings for these same workers have actually declined by 1 percent since August 2003. Moreover, average real hourly earnings for these workers have remained essentially flat since the fourth quarter of 2000 and have actually declined since August 2003, despite the fact that productivity (output per hour) in the nonfarm business sector has increased by 18.4 percent since the fourth quarter of 2000 and by 8.8 percent since the second quarter of 2003.