At least we're not Europe, you might say. The U.S. economy created 115,000 jobs in April, the Bureau of Labor Statistics reported on Friday. That's slow and disappointing, but it's progress -- something most of the developed world knows nothing about these days.
What should you make of the numbers? It can't be repeated enough that initial reports need to be taken with a grain of salt. Statistically, the margin of error in monthly jobs reports is plus or minus 100,000, so April may have been much better or worse than it looked. Friday's report showed February and March's jobs numbers were revised up by 53,000. April's numbers will likely be revised one way or another in the coming months, too.
More meaningful is a six-month average. The economy has created an average of 197,000 jobs a month since last October, with the private sector generating 207,000 jobs a month (declines in government jobs lowered the overall average). That's actually pretty good. The average job-creation number in any given six-month period over the last 50 years is 119,000 a month. Over the last decade, it's 11,000 a month. The economy added an average of 85,000 jobs a month during the 2002-2005 recovery -- and many were government jobs as the private sector continued to languish. If this were a normal economy, the kind of jobs growth we've seen over the last six months would be healthy and happy.
But this isn't a normal economy. So many jobs were lost from 2008 to 2010 that today's normal growth rate feels downright awful. There are still 4.9 million fewer jobs today than there were at the end of 2007. Add in population growth during that period, and even with decent jobs growth lately the hole in our labor market is perhaps 7 million jobs deep. If we continued growing jobs at 200,000 a month, the unemployment rate wouldn't fall to 6% until 2021. That is probably the most important job statistic you can know these days.
And many of the new jobs created lately are in low-paying industries. One-third of new jobs created in April came from food services and temporary services. "Administrative and waste" contributed another third. Average hourly earnings among all employees are up 1.8% over the last year -- below the rate of inflation. Part of the loss in earnings has been made up with an uptick in the average number of weekly hours worked, but that's a tough way to get ahead in life. There is no question about it: It stinks for tens of millions of Americans.
Now some technical stuff. The unemployment rate fell to 8.1% in April from 8.2% in March. Using a broader unemployment rate that includes those who have given up looking for work or are involuntarily working part time, the unemployment rate held steady at 14.5%.
The difference between those two figures underlines the fact that millions of Americans have simply stopped looking for work, and thus aren't counted in the traditional unemployment rate. The trend has become so bad, some say, that the best measure of unemployment is the labor force participation rate, or the percentage of the working-age population that is either employed or unemployed but looking for work.
Sure enough, the labor force participation rate has dropped big time in recent years, suggesting that legions of Americans who used to be active participants in the job market have given up. The participation rate in the 1990s was often near 68%. Today it's about 63%.
But economists had been predicting most of that decline for years, well before the recent recession began. How did they foresee it coming? A lot of the decline has nothing to do with a weak economy. It's about demographics and education. As the baby boomers age, retirement rates are rising. And as higher education becomes more necessary, more are spending their teens and 20s in school instead of working. Those two facts combined would cause the labor force participation rate to fall even if the economy were booming. The finance blog Calculated Risk recently showed the actual labor force participation rate compared with a 2002 projection by sociologist Robert Szafran, which tells the story:
Indeed, the Bureau of Labor Statistics keeps track of not just how many people drop out of the labor force, but why they dropped out. It does that the old-fashioned way: It asks them if they want a job or not. Even though the number of Americans not in the labor force has increased by more than 10 million since 2007, those who left the labor force and claim to want a job has increased one-fifth that amount, or 2 million. In the last year, the number of Americans age 16 and up not in the labor force increased by 2.7 million, yet those claiming to want a job declined by 140,000.
But those are small wins and clarifications amid what is clearly a painfully weak jobs market. People worry about politics and deficits and education and the environment, but without a job, little else matters. Right now, there just aren't enough.
Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Follow him on Twitter @TMFHousel. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.