The Labor Market Recovery is Real, Maybe, or Not

Last week, the Census Bureau released new figures showing that poverty rose and incomes fell for the third year in a row. President Bush's response has been the economic equivalent of "My Pet Goat": No response, no acknowledgement, no comment – for seven days. Today, the Bureau of Labor Statistics released the new employment figures for August. The figures show that 144,000 jobs were added in August. This is much better than the poor performance of June and July, but it is still a far cry from making this a strong or even average labor market recovery.

Undoubtedly, the administration will tout the fact that job creation has been stronger than it was in the previous two months and that it barely met market expectations of 150,000 new jobs, according to Bloomberg. However, this is more a reflection of the low expectations and the poor performance of the previous months than an indication of the strength of the labor market. In fact, even with the employment growth in August, average monthly job growth during this recovery has been a low 0.01 percent, and even during the past 12 months when jobs expanded, only two months out of 33 have seen above average job growth.

Another way to see the weakness of the labor market is the total number of jobs created since the start of the recession in March 2001. Over the course of the 41 months, the economy actually lost 1 million jobs, and even if job creation continued at the strongest monthly rate of this recovery, which occurred in March 2004, it would take the recovery into its fourth year before the labor market got back to where it was at the start of the recession. This is a first since World War II, marking the weakest labor market recovery since the Great Depression.

Today's labor market report shows additional signs of weakness. In particular, the slight decline in the unemployment rate, although statistically not significant, was the result of 152,000 formerly unemployed giving up looking for jobs in August. People are voting with their feet on the state of this labor market, and they are saying that it is not worth looking for jobs any more.

Another troublesome aspect comes from the figures on long-term unemployment. Long-term unemployment has never been at this point in a recovery. For instance, the average long-term unemployment rate was 19 weeks in August. Typically, 33 months into a recovery, the average length of unemployment has been 12 weeks, or 50 percent shorter. More importantly, all indicators of long-term unemployment worsened in August. The average length, the median length of unemployment and the share of people unemployed for 27 weeks or more rose in the last month.

The weak employment record has taken its toll on workers' incomes. For three years in a row, family incomes have fallen and poverty has risen. Compared to 2000, the income of a typical family was down by $1,535 in inflation-adjusted terms. The income losses were especially pronounced for low-income families, whose income declined by 6 percent from 2000 to 2003.

The trend did not stop there. Income gains since 2003 have been remarkably weak. In inflation-adjusted terms, hourly and weekly earnings had declined by about 1 percent from the end of 2003 to July, the last month for which data are available. Today's numbers indicate that earnings did not increase enough in August to reverse this trend. Despite increases in hourly earnings and weekly earnings in August, inflation-adjusted earnings for 2004 will likely remain below the levels of late 2003.

Declining incomes, especially for low-income families, has meant that poverty has been on the rise for three years. The poverty rate rose to 12.5 percent, its highest level since 1998. An additional 1.3 million people became poor in 2003 alone.

Amid the weak labor market performance of the past few years, the quality of jobs has also declined. Most notably, last week's report by the Census Bureau showed that employer-sponsored health insurance coverage continued its decline. In 2003, almost 40 percent of workers had no employer-sponsored health insurance coverage, the highest proportion since 1994. And amid continued rapid increases in health insurance costs, employers are more likely to drop coverage than to increase it.

The numbers have been telling a consistent story for almost three years. This is the weakest labor market recovery since the Great Depression, and even when employment began to grow, it did so an anemic rate. The lackluster job growth has depressed wage growth and contributed to employers shedding crucial benefits, such as health insurance coverage. And far from turning the corner, the economy seems to be stalled at this point. There are few signs that show a consistent trend of improvement. August was, in fact, the first time since March that the labor market improved. No wonder the administration has been silent on the income and poverty trends.

Christian E. Weller is senior economist at the Center for American Progress.