In the Nation's Interest
The Latest Jobs Report Is Like A ‘Special Blend’ of Mediocre Wine
by Joe Minarik July 07, 2017
Connoisseurs of wine, tea, and orange juice — among other food and beverage products — tend to look down their noses at grocery store items that are self-described as "special blend." Almost invariably, the "special blend" is chosen not because it reaches ethereal heights of flavor, but rather because it achieves a pedestrian balance that can be replicated through rough-and-ready adjustments whenever any particular ingredient is unavailable or falls short of its quality norm.
From that perspective, this month’s employment report is such a "special blend." Rarely does one data release hit all of the high (or low) notes and truly herald a breakout from a long-term trend. In the fullness of time, this report likely will take its place as one more link in a continuing chain. There are strong spots, but not likely to the extent that they override the continuity of necessary-but-unsatisfying, even plodding, recovery from last decade’s financial crisis.
There is positive news in the 222,000 new jobs found in the more-reliable survey of employers (relative to the more-erratic household survey that makes up the other part of the report). That growth was coupled with upward estimates that added 47,000 jobs above the original reports in April and May. So the average job growth for the last three months was 194,000. This latest June number was an acceleration from that average, and it hit a level greater than needed to accommodate new entrants to the labor force.
Meanwhile, the labor force, as measured in the household survey, took a sizable jump of 361,000. That was enough to push the labor force participation rate up one tenth, to 62.8 percent. This remains well below historical highs, but it is a move in the right direction. A positive interpretation would be that some formerly discouraged workers have been enticed off of the couch by the low unemployment rate and the job prospects in their local labor markets. But like any one-month change in the household survey results, it must be interpreted with caution.
Below those headline numbers, however, there are some signs much closer to steady-as-you-go. Progress in hours worked and in earnings was fairly slow. The big contributors to job growth were in health care, which has bounced up and down (probably partly because of the turmoil in public policy), and leisure and hospitality (possibly temporary, from the start of the vacation season), and government. Professional and business services chipped in, but less than in previous months. There is no irresistible upward force in evidence.
These employment numbers fit into a larger economic data picture that is underwhelming — though not particularly worrying, either. Auto sales are okay, but down from recent peaks. With incomes growing only moderately, consumer sales generally are steady but less than robust. The consumer seems twice shy after having been bitten so badly in the financial crisis. In fact, the job creation numbers this month much more quell concerns about a potential slowdown than fuel hopes of a boom.
What economic optimism we have seen of late has been reflected in the stock market, a recognized leading indicator. But the stock market itself can be driven by optimism on the part of a comparatively small number of members of the investment industry — whereas the real economy can be moved only by cold, hard cash spending which as yet remains only a forecast. Investor optimism seems to have arisen in significant part because of anticipations of big spending and tax cuts from Washington — but quick Washington action is increasingly a matter of doubt. And behind potential crash (pardon the pun) infrastructure spending programs and big tax cuts lurks the concern that the Treasury cannot afford such stimulus for long.
Put it all together, and it seems that our special blend of an aging, stagnant working-age population can likely manage little more than the 2 percent overall economic growth to which we have become reluctantly accustomed. This month’s employment report eases fears that we might fall short of that standard, but offers little reason why we might exceed it, either.