Economy recovers all jobs lost in Great Recession; don’t celebrate yet
After adding 217,000 net new jobs last month, the U.S. economy has recovered all the positions lost during the Great Recession. But economists warned that the news Friday from the Labor Department was no real reason to celebrate.
“Things are improving, but it’s happening agonizingly slowly,” said Heidi Shierholz, a labor market economist at the Economic Policy Institute.
“At the pace we are currently going, it will take nearly four more years to get back to prerecession labor market conditions.”
Total nonfarm employment in May reached 138.463 million, surpassing the previous high point of 138.365 million in January 2008, the Labor Department said.
The recession, which had just begun then, caused the economy to shed 8.7 million jobs through February 2010. The labor market has been slowly growing since then and the announcement that the workforce had hit a new record was a milestone in the recovery.
But Shierholz noted that the working-age population has grown by 14.5 million people since January 2008. She estimated the economy is still 6.9 million jobs short of where it was at the start of the recession, given that growth. The gap is reflected in the unemployment rate. The Labor Department said Friday that the rate held steady in May at 6.3%, the lowest level since September 2008. But the rate was 5% when the recession began in December 2007, and economists say that’s roughly the full employment level.
And the unemployment rate might overstate the health of the labor market.
The labor force participation rate held steady in May at 62.8%, the lowest level since 1978, and Federal Reserve policymakers said they were using other indicators in addition to the unemployment rate to determine how much stimulus the economy still needs.
May’s job growth was solid but unspectacular, down from 282,000 jobs added in April and roughly in line with analysts’ expectations. The Labor Department initially estimated April’s job growth at 288,000.
The economy has averaged 197,000 net new jobs a month over the last year.
But many of the jobs being created to replace those lost in the recession are lower-paying, such as retail sales clerks and restaurant workers.
“It is a quality game much more than it is a quantity game,” said Lindsey Piegza, chief economist at brokerage Sterne Agee.
“We’re really not seeing that high-wage recovery that is indicative of a strong consumer lining their pockets with wages and going out and spending,” she said.
The strongest job growth last month was in business and professional services and in healthcare and social assistance. Both sectors added 55,000 net new jobs. Employment in restaurants and bars rose by 32,000 in May. But higher-wage manufacturing and construction industries saw little change in employment.
Overall, average hourly earnings in the private sector rose by 5 cents last month to $24.38. Over the 12 months ended in May, wages are up 2.1%, not much above the rate needed to keep up with inflation.
After a winter slowdown caused by extreme weather, the recovery has shown signs of picking up.
The economy shrank 0.1% from January through March, the first quarterly contraction in three years. But economists are expecting the economy to grow by as much as 4% in the second quarter.
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