Today's release of the March employment figures by the Bureau of Labor Statistics show that the labor market four years into this business cycle still lacks substantial momentum.
Employment growth in March was a disappointingly low 110,000 new jobs. This is well below historic averages, but it is in line with the weak labor market of the past four years. Since March 2001 there were only five months that had above average employment growth (Figure 1: Employment Growth in this Business Cycle). Monthly employment growth from the end of World War II to the start of the last recession in March 2001 was 2.1 percent on an annualized basis. For much of this business cycle, employment growth was negative or flat. Average employment growth was 0.08 percent for the past four years, with jobs growing by 1.0 percent on annual basis in March 2005.
Sub-par employment growth has not kept pace with population growth for the past four years. At the start of this business cycle in March 2001, 64.3 percent of the working age population was employed. Four years later, it was 62.4 percent. Had the labor market created enough jobs over the past four years to at least keep pace with population growth, there would be 6.3 million more jobs than there are today.
Other indicators reflect the ongoing weakness of this labor market. In March, manufacturing lost another 8,000 jobs, after already shedding millions of jobs in previous years. Also, retail employment fell by 9,700 jobs, mirroring slower consumption depressed by low income growth and high debt levels. Further, slow employment growth still weakened employees’ bargaining power and kept wage growth low. Average weekly hours were unchanged and average hourly earnings of production, non-supervisory workers, the vast majority of the labor force, rose by a 0.3 percent, barely enough to keep pace with price increases. Finally, long-term unemployment rose again, reflecting people’s inability to find a job.
Four years into this business cycle, the labor market still has not found a solid footing. The continued underperformance of the labor market is a major contributor to the record debt levels that families have amassed. Without the labor market gaining substantial strength, the indebtedness of households will eventually threaten the durability of a strong recovery, especially because interest rates are already on the rise.
Christian Weller is a senior economist at the Center for American Progress.