The abbreviated version of Friday's June jobs report can be told in two words: not good.
The economy created 80,000 jobs last month, with the private sector adding 84,000 positions and governments shedding 4,000.
The report was a "step in the right direction," President Barack Obama said. That's about the best an optimist can gather from the numbers. No single month's employment report should be taken too seriously, but even averaging the past six employment reports together yields a figure of 150,000 new jobs per month. At best, that's enough to keep the unemployment rate flat:
Source: Bureau of Labor Statistics.
The reality for millions is probably worse than this chart does justice. The standard unemployment rate held steady at 8.2% in June. But the underemployment rate, which includes those who have given up looking for work and those working part time involuntarily, has risen in each of the past two months, and now sits at almost 15% (though it's down considerably in the last year).
If we keep adding an average of 150,000 jobs a month, the unemployment rate will effectively never come down. If we double that and add an average of 300,000 a month, it will still take four years to bring unemployment to a healthy rate of 5%. This long, grinding recovery is unprecedented in modern times:
Think about this. If we add 250,000 jobs a month -- far more than we are now -- unemployment would not fall to post-recession levels until around 2020, or 13 years after the recession began. By most measures, unemployment during the Great Depression was back to pre-recession levels by 1941 or 1942, or about 13 years after the depression began. And what drove the new employment boom back then was, of course, World War II -- a jobs fair of sorts no one wants repeated. The employment crash of 2008 and 2009 was so deep, and the recovery ever since so dawdling, that we may look back on this era as the longest employment crisis ever -- including the Great Depression.
This is serious stuff. Drawn out unemployment benders have a nasty tendency to stick around for generations. As Wharton professor Justin Wolfers worried last year:
Typically in the United Sates, if you're unemployed you're unemployed for three months. You get back to work. You didn't lose many skills. In Europe, folks are unemployed for a year, two years.
Today in the United States, people are starting to get unemployed six months and twelve months. They're losing contact with the world of work. And so the problem is that, even when the economy comes back, it's not clear that these folks are necessarily going to be in contact with the labor market, able to pick up jobs even when the economy generates them. …
I'm terrified that if we leave millions of people out there decreasingly engaged with the world of work, structural unemployment may become an American problem in ways it has been a European problem.
There's at least one optimistic rebuttal. We tend to underestimate how fast things change, including for the better. Housing might be that veiled boost in waiting. Warren Buffett said last year, "We will come back big time on employment when residential construction comes back … you will be surprised, in my view, how fast employment changes when that happens." The eminent finance blog Calculated Risk echoed a similar position last week. With housing starts, new home sales, and construction spending all looking up, construction employment "should add to both GDP and employment growth in 2012," the blog's analyst Bill McBride wrote. That isn't happening yet -- construction employment was basically unchanged in June -- but it's not hard to make the case that it must happen soon, and that its potential is underappreciated by most.
That, though, is a forecast. The reality that's here today is different: Millions are out of work, millions more aren't working enough, and millions more are earning meager wages. If we are moving in the right direction, it isn't nearly fast enough.