What Should We Make of Friday’s Jobs Data?
On Friday morning, the Bureau of Labor Statistics reported that the American economy created 192,000 jobs in March, and that the unemployment rate held steady at 6.7 percent. If you look at some of the articles published in response to this data, you would have no idea what to make of it. Some indicate that this number was excellent (e.g., this article from the Miami Herald), and that it points to an improvement in the economy. Others, such as this report from Forbes, maintain that labor data remains weak.
The fact of the matter is that the unemployment rate as reported by the BLS tells us very little about individuals’ economic situations. Other data are more enlightening, but again, not very revealing. Here’s why.
First, the data don’t differentiate between the unemployment rate and the underemployment rate. Someone who is underemployed is employed at one job but who is qualified to do a more productive job. For instance, somebody with a chemistry degree working at McDonald’s because s/he cannot find work with a chemical manufacturer or a drug company is underemployed.
The BLS actually does look at this data, which can be found here. The “official” data — that is, the number that appears in all of the headlines — is the seasonally adjusted U3 data. The number that measures the underemployment rate is the seasonally adjusted U6 data. This number actually ticked up one-tenth of a percent in March, to 12.7 percent.
Second, this number fails to point out how well these employed people are doing economically. Somebody may be employed, but s/he may have a low standard of living. There are data points that can help us determine how people are doing economically, but they are imperfect. For instance, we know that the median household income fell year-over-year from 2011 to 2012 (2013 numbers aren’t yet available), despite the fact that employment figures improved over that time frame. This speaks to the fact that more households are being created in the United States than jobs.
Another data point that we can look at is hourly earnings. Average hourly earnings sit at about $10.40. Since the financial crisis, this figure has been between $10.20 and $10.40, which means that there really hasn’t been any improvement in terms of salaries, which suggests that productivity per hour worked has remained flat. Note that this is average hourly earnings and not median hourly earnings, which means that it includes high salaries as well as lower salaries. This makes the data very difficult to interpret.
It is slightly more useful when we consider that on average, people worked just over 34 hours per week. Thus, we can draw from this that the average weekly salary is a mere $354, which comes to just $18,387 annualized. This isn’t very much. It gets worse when we consider that it only takes a few very large salaries to substantially skew this data. Consider that 145 million people are employed. If just 1 million of them make $250,000 per year, then this accounts for $1,720 of this $18,387, which means less than 1 percent would account for 9 percent of the total wages earned in the U.S. Consider also that of these 145 million people, 30 million people are not making enough to pay income taxes.
The fact that people aren’t making that much money, employed or not, is made clearer when we consider that over the past six years, the number of people on food stamps has risen from just under 30 million to over 45 million. This is an incredible 50 percent increase.
Ultimately, the unemployment number is not that big a deal in the context of these other figures. It fails to show just how much Americans are really struggling. We have seen the following:
- Six percent of those people in the workforce are underemployed — they are making less money than they could be making and they have skills that are going to waste.
- Median household income remains extremely weak.
- Hourly and annualized earnings are extremely low, which means that a lot of the jobs being creative aren’t very productive.
- Even if more people have jobs, even more people are impoverished to the point that they cannot afford to eat without government aid.
So while 192,000 more jobs were created, this doesn’t mean that the economy is stronger or that people are better off. The bottom line is that a lot of people are struggling economically, and Friday’s number does very little to change this.