The headlines from Friday’s job report are that modest job growth continued in July—the monthly payroll figure was up by a hundred and sixty-two thousand—and the unemployment rate dipped to 7.4 per cent, which, the White House was quick to point out, is the lowest figure since December, 2008. That’s good news, as far as it goes. But the underlying reality is that the U.S. economy has hit a sluggish patch, as tax hikes, the sequester, and recent statements from the Federal Reserve have combined to restrain spending.
It’s not as if the economy is plunging into another recession, but hopes that it would finally achieve “takeoff speed”—a rate of growth at which it would no longer need extensive government support—have again been disappointed. In the past few months, a series of buoyant job reports have disguised this reality, leading some analysts to believe that households and firms were shrugging off the tightening policies. Based on this sort of thinking, the consensus on Wall Street was that the new payroll figure would come in at close to two hundred thousand.
In addition to disappointing those expectations for July, the Labor Department revised down the payroll figures for May and June. May’s figure went from 195,000 to 176,000; June’s from 195,000 to 188,000. After these changes, the average monthly gain over the past three months is about a hundred and seventy-five thousand. That isn’t too bad, but it’s a bit lower than the average figure for the past twelve months, which is a hundred and ninety thousand.
From one perspective, it’s a bit surprising that hiring has held up this well. On Wednesday, the Commerce Department reported the Gross Domestic Product expanded at an annual rate of just 1.7 per cent between April and June, and that the growth rate was even lower between January and March: just 1.1 per cent. In fact, according to the G.D.P. figures, the economy has been in a bit of a torpor for over a year. Since the second quarter of 2012, the rate of growth has been less than 1.5 per cent.
Ordinarily, with the economy growing so slowly, the unemployment rate wouldn’t have come down at all. It might well have risen slightly. But for reasons economists don’t yet fully understand, the jobless rate has continued to trend down, falling from 8.2 per cent a year ago to 7.4 per cent in July.
That’s good news for the Obama Administration, but there won’t be much celebrating in the White House. The percentage of the working-age population in the labor force, which is known as the participation rate, is 63.4 per cent, indicating that many Americans are still too pessimistic about the job market to even look for work. (In January, 2008, at the start of the recession, the participation rate was 66.2 per cent.) Average hourly earnings dipped a bit last month, which isn’t supposed to happen when the unemployment rate is falling, reflecting the fact that many of the new jobs the economy is creating continue to be low-wages ones, in industries like hospitality and retail. Employment in restaurants and bars rose by 38,400 in July, by far the biggest jump in any industry.
Outside of the auto sector, which is thriving, manufacturing remains comatose. The construction industry, which should be in good shape given the rebound in the housing market over the past year or so, shed six thousand jobs last month. It’s too soon to say for sure, but that could be an effect of the recent rise in mortgage rates following Ben Bernanke’s suggestion that the Fed might start withdrawing some of the monetary stimulus it has been administering to the economy. (That had come in the form of quantitative easing—printing money to buy treasuries and mortgage bonds.)
Most ominous from a political point of view are the Labor Department’s survey of households, which is separate from the payroll survey, and which showed that part-time employment jumped by a hundred and seventy-four thousand in July, almost twice as large as the ninety-two-thousand rise in full-time jobs. Republicans immediately seized upon these figures, attributing them to the imminent arrival of Obamacare, leading employers to shift workers from full-time to part-time in order to avoid having to give them health-care benefits. (The cut-off for the employer mandate is thirty hours a week.)
To put it mildly, there’s not a lot of evidence to support this theory. Evidently, the main reason part-time employment is rising is because a lot of the new jobs are being created in places where part-time work has always been common, such as restaurants and bars. Ian Shepherdson, the chief economist at Pantheon Macroeconomics, tweeted, “If anyone tells you the reported 174K rise in part-time jobs in July is due to Obamacare, put your fingers in your ears and sing la la la.”
If you are watching the political shows this weekend, that could be sound advice. Four years after the trough of the Great Recession, the economy is still stuck in the New Normal, a state characterized by modest G.D.P. growth, elevated jobless rates, stagnant wages, and hefty corporate profits. But Obamacare doesn’t have much, if anything, to do with it.
