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A Sunny Response to Stormy Weather

As I wrote earlier today, it is difficult to see the May jobs numbers as anything but a worrying disappointment. The stall-out in job growth might be temporary — but it is a stall-out. Private employers are not generating enough jobs to put a dent into the headline unemployment number. (It declined last month only because workers left the labor force.) The economy needs to add 100,000 jobs a month just to keep up with population growth. In May, despite improvements in consumer spending, private employers added just 41,000 new jobs.

You would not know that reading the sunny responses from some in Washington. Granted, members of government are not in the business of criticizing any boost in employment when it is their policies and priorities being judged. Still, the responses seem overly optimistic given that private-sector job growth ticked down for the first time in four months and 95 percent of new jobs came from temporary census hiring. Here is a round-up of responses:

President Barack Obama focused on the fact that the private sector has generated jobs for the past five months, and sensibly warned against reading too much into a single month’s numbers:

A lot of businesses were hit hard during this downturn, but they’re starting to hire again. Workers who were laid off, they’re starting to get their jobs back. Companies that were almost forced to close their doors are making plans to expand and invest in new equipment.

And this progress is reflected in the monthly jobs reports that we get each month. We received one today. In May, the economy added 431,000 jobs. Now, this is the fifth month in a row that we’ve seen job gains. And while we recognize that our recovery is still in its early stages and that there are going to be ups and downs in the months ahead — things never go completely in a smooth line — this report is a sign that our economy is getting stronger by the day.

Now, I want to emphasize that most of these jobs this month that we’re seeing in the statistics represent workers who’ve been hired to complete the 2010 census. So these are temporary jobs that are only going to last until the fall, and that may be reflected in future jobs reports. But even if you put those temporary jobs aside, there’s no doubt that we saw another month of private sector job growth. And that is obviously critical because when businesses are hiring again, people start spending again. That, in turn, gives businesses more and more incentive to grow.

Chair of the Council of Economic Advisers Christina Romer says the report is a sign of “recovery,” which seems, well, wrong. But she did note that the broader unemployment measure, which includes people working part-time looking for full-time positions, improved, and that we still have “a very long way to go” until we reach a full recovery:

Today’s employment situation report shows continued signs of labor market recovery. Payroll employment rose for the fifth month in a row, and the unemployment rate fell two-tenths of a percentage point to 9.7 percent. While these are encouraging developments, we clearly have a very long way to go until the labor market is fully recovered. It is essential that we continue our efforts to move in the right direction and generate steady, strong job gains and continuing declines in unemployment.

Payroll employment rose 431,000 in May. As expected, most of this increase was due to temporary hiring associated with the decennial Census. Total private employment increased by 41,000, somewhat lower than the rate of increase in previous months. Building on the steady gains in previous months, private employment is now nearly 1/2 million higher than in December 2009. Both manufacturing and service-providing industries showed job gains; employment in construction and state and local government, however, fell noticeably. Average weekly hours, which are another important indicator of labor market healing, rose by one-tenth of an hour in May and are up four-tenths of an hour since last December.

The unemployment rate, which had risen in April, fell two-tenths of a percentage point to 9.7 percent. Both the labor force and the household measure of employment fell in May, following tremendous gains in the previous months. Consistent with the rise in average weekly hours, the number of full-time workers rose for the fourth month in a row and the number of people working part-time for economic reasons declined sharply.

The fact that the unemployment rate fell and private employment rose are obviously encouraging signs that recovery continues.

Secretary of Labor Hilda Solis took the opportunity to laud the stimulus bill:

This past May, the economy gained 431,000 jobs, and the unemployment rate dropped to 9.7 percent. This marks the fifth straight month that we have had job growth. While the temporary hiring of 411,000 Census workers accounts for most of the job growth in May, the private sector also contributed 41,000 jobs. Since the beginning of the year, private companies have added close to half a million workers.

These numbers indicate that the steps this administration has taken over the past year have put the American economy on the right track. The most recent estimates from the Council of Economic Advisers indicate that the Recovery Act saved or created between 2.2 and 2.8 million jobs through the first quarter of 2010 and helped raise gross domestic product for a third straight quarter. The economy has added jobs in six of the last seven months.

Speaker of the House Nancy Pelosi called it “not enough”:

Today’s jobs report marks another step forward for our middle class, working families, and small businesses, but it is not enough. We must do more to strengthen our private sector, support our small businesses, and keep our economy moving in the right direction.

Last month, the unemployment rate fell and private sector jobs expanded; we have added jobs in six of the last seven months. This year, we have added an average of 200,000 jobs per month, a majority in the private sector, a stark contrast to the Bush Administration record of losing an average of nearly 750,000 jobs per month in its last three months.

Democrats in Congress will continue taking action on our number one priority: creating good-paying jobs for the American people. Last week, the House passed the American Jobs and Closing Tax Loopholes Act — to create jobs, close loopholes that allow companies to ship jobs overseas, cut taxes for our middle class, and help Americans who lost work through no fault of their own. We will work with the Senate to complete this legislation and take more steps forward for our economy, such as expanding lending for the small businesses that are the engine of our economy.

Chad Stone, chief economist at the Center for Budget and Policy Priorities, starts out optimistically but quickly gets into the disappointing nitty-gritty:

Today’s jobs report shows a labor market that has turned the corner and is creating jobs but one with a long way to go toward a full recovery from the devastating job losses of 2008-09. The percentage of the population with a job is generally moving in the right direction but remains at a very depressed level (see chart). Unemployment is still very high, and jobs are still hard to find.

Under these circumstances, policymakers should have no qualms about passing a robust jobs bill — indeed, they would be derelict not to. Unemployed workers struggling to find a job need the help, and based on current forecasts of relatively weak economic growth for the rest of the year, the economic recovery could really use an additional boost.

David Leonhardt of The New York Times calls the report “good,” but has great analysis of the serious caveats:

Today’s jobs report was another good one. Job growth picked up from April to May. So did wages. The average workweek lengthened. The number of people working part-time because they could not find full-time work dropped. (More on the details here.)

But the good news comes with two caveats. Much of the job growth seemed to be among temporary workers hired by the Census Bureau. The economy gained 431,000 jobs last month, up from 290,000 in April, mostly because the federal government added 412,000 workers. The private sector added only 41,000 jobs in May, down from 218,000 in April and 158,000 in March.

You never want to read too much into a single month of data. This may just be just a blip. But it also could be something more — a slowdown in hiring because businesses are worried about the state of the economy. Last month had its share of worrisome economic news, much of it from Europe. In a note to clients this morning, Joshua Shapiro, an economist at MFR Incorporated in New York, pointed out that some other data, like the weekly number of new claims for jobless benefits, have also worsened recently.

The second caveat is that even if private-sector job growth picks up again next month, the economy is a very long way from being healthy. It would need to add about 15 million jobs over the next four years — more than 300,000 a month — to return the unemployment rate to roughly its December 2007, pre-recession level of 5 percent. That would be faster job growth than in any four-year period of the 1990s boom. It’s not likely.

And in the House, members focused on the need for a new jobs bill. Here’s Rep. Sander Levin (D-Mich.), for instance, via an emailed press release:

Today’s report is another sign that we are headed in the right direction, but further steps are necessary to boost job growth. It is vital that the Senate act immediately on the Jobs bill that passed the House and that Republicans start to join in the effort. The Jobs bill supports million of jobs through tax incentives like the R&D tax credit, bonding for infrastructure development, and it continues to provide support for unemployed workers as they look for work during this difficult recovery.

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