Job creation in the U.S. economy, or the lack of it, is far worse than most understand and despite the downward trend in the unemployment rate, celebrated by government officials, the media and others, it ought to be a cause for serious concern. That, in a nutshell, is how Dr. Sean Snaith, Director, UCF’s College of Business Administration Institute for Economic Competitiveness, describes the current state of the labor market in the latest quarterly September 2013 Report, released Wednesday.
It is true that the unemployment rate has ticked down from 9.8% in 2010 to 7.3 percent in August 2013, but that’s only part of the story, says Snaith, lead author of the report.
“The obsession with getting payroll employment back to prerecession levels as somehow signaling recovery, is misleading,” the report states. While it’s useful to look at a single metric – the headline unemployment rate – the participation rate must also be considered. For instance, in August 2013, unemployment ticked down to 7.3%, but in that same month, the labor force participation was at its lowest point since 1978.
“If labor force participation rates were at their prerecession levels, the current unemployment rate would be approximately 11.4%” the report observes. Moreover, if a broader measure of unemployment is considered – U6 – which takes into account discouraged workers and those working part-time, the jobless rate is a “painfully high” 13.7%.
There is also the no small matter of not considering the jobs that should be created all along to keep up with growth in the labor force.
According to the report, the U.S. labor market is currently 8.6 million jobs short of what the economy’s potential workforce should be and not the 1.9 million job gap between current payroll employment and prerecession levels of employment.
“The current state of the labor market is far worse when viewed through this lens than when just merely comparing prerecession payroll employment levels to current levels,” the report states.
The report presents several scenarios of estimated job growth and notes that, “If job growth were to persist at the average level of the past 3 job reports and increase at just 148,000 jobs per month, it would take until December 2021 for employment to reach its potential.”
EXTRA: Incidentally, according to the ADP released today, U.S. companies added only 166,000 jobs in September, somewhat weaker than the 180,000 estimated by economists.
