Sunday, July 6, 2014

Bigtime June jobs report shows economy has thawed

Right before the Holiday weekend, the Bureau of Labor Statistics released the jobs report for June. In addition to the interest surrounding a typical jobs report, this came on the heels of a startling revision of 1st Quarter GDP, which showed the economy didn't shrink by 1.0%, as we thought in May, but by 2.9%. This was the worst mark since the end of the Great Recession in mid-2009 (we had a minor reduction in Q1 2011, and growth in every other quarter), and given that the jobs report not only gives a new month of data, it also has 2 months of revisions, so we'd have numbers for all 3 months of the 2nd Quarter of 2014.

Well, the numbers weren't just good, they were great. 288,000 jobs added, 265,000 in the private sector, and the unemployment rate fell by 0.2% down to 6.1 % - the lowest in nearly 6 years. April and May were revised up as well (by a total of 29,000 jobs) so we had 317,000 more jobs than we knew previously, and job creation was strong throughout Q2 2014.

Change in jobs, April-June 2014
April 2014 +304,000 (+278,000 private)
May 2014 +224,000 (+224,000 private)
June 2014 +288,000 (+262,000 private)
TOTAL +816,000 total (+764,000 private)

At the same time, unemployment dropped by 0.6% between March and June, from 6.7% to 6.1%. Compare that to the jobs numbers in the first three months of 2008, as the Great Recession was starting to kick into gear.

Change in jobs, January-March 2008
Jan 2008 +15,000 (+3,000 private)
Feb 2008 -86,000 (-115,000 private)
Mar 2008 -80,000 (-106,000 private)
TOTAL -151,000 (-218,000 private)

In other words, the U.S. is doing more than 320,000 jobs a month better than we were at the start of 2008. And the start of the lighter recession of 2001 also had jobs decline in 2 of the first 3 months of that year. So no, it doesn't seem like a recession-like pattern here in 2014. In fact, the U.S. has had 12-month private sector job growth between 2.25 million and 2.49 million for more than a year- a sustained level of growth that hasn't been seen since the Clinton presidency in 2000.

What it also does is that it puts a lot of the claims of "it's working" by Scott Walker and WisGOP to shame. Because the evidence is even more overwhelming today that it is the national economic recovery that is leading to Wisconsin job creation, and Walker/WisGOP policies are keeping us from reaping more benefits from that. In fact, if Wisconsin had kept up with the 2.1% rate of private-sector job growth that the U.S. is seeing, we'd be adding more than 50,000 jobs a year. Instead we're lucky to add 30,000 in a 12-month period (and have only gained 10,200 through May). I've now updated the Walker jobs gap charts, as the upward revisions for April and May means the state is in the hole by 58,000 private sector jobs, and more than 51,000 jobs overall.

And now the state has to gain 5,600 private-sector jobs for June just to keep up with the rest of the country, so anything less than that should be seen as a disappointment on top of an already-bad record. The "5.7% unemployment is lower than the U.S. rate" talking point is quite lame as well, as the state's "unemployment advantage" was much higher when Walker took office than it was today. In WisGOP's defense, both them and the U.S. have seen decent drops in unemployment since the end of last year.

Wisconsin unemployment vs. US rate, 2011-2014
Jan 2011- Wis. 7.7%, US 9.1% (Wis. -1.4%)
Dec 2013- Wis. 6.3%, US 6.7% (Wis. -0.4%)
May 2014- Wis. 5.7%, US 6.3% (Wis. -0.6%)
TOTAL CHANGE SINCE JAN 2011 Wis -2.0%, U.S. -2.8%

And this lower unemployment trend continued in the U.S. in June, dropping another 0.2%. So no, we're not heading into recession. If anything, our steady job growth seems to be picking up steam. We'll see if it continues for the second half of 2014, and even though he won't say it in public, I bet Scott Walker is hoping it does as well. It might be his best chance to convince enough suckers Wisconsin voters to give him another term.

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