On Friday, the Bureau of Labor Statistics released employment data for the month of November that was widely regarded as good news due to the creation of 321,000 jobs, which far exceeded economists’ expectations. Still, some economic indicators need to improve before the economy should be considered fully recovered.
“In general the deep recession is forcing everyone to get smarter about how we look at labor market statistics — just looking at the top line unemployment rate and inflation was enough for the Fed until this recession,” Michael Madowitz, an economist at the liberal Center for American Progress, told the Washington Examiner. While job growth was strong, other economic factors, such as the duration of unemployment and wage growth, still need to improve.
In November, the median duration of unemployment dropped by .9 weeks to 12.8 weeks. The average duration of unemployment remains high. James Sherk, a labor economist at the conservative Heritage Foundation, told the Examiner, “The average duration of unemployment hasn’t improved, which says that there is still a significant minority of the unemployed who is spending a prolonged period of time out of work.”
The median duration of unemployment peaked at 25 weeks in June 2010 and has been cut by more than half since then. The average duration of unemployment has failed to see the same improvement, now at 33 weeks, down from its peak of 40.7 weeks in December 2011.
The average duration of unemployment is still historically high. Prior to the Great Recession, the highest average duration of unemployment was 21.2 weeks in July 1983. The average from 1948 to 2007 was 13.5 weeks, less than half of November 2014’s figure.
The longer workers are unemployed, the more their skills atrophy. Whether a high-skilled technical worker or a low-skilled minimum wage worker, the unemployed have difficulty keeping their skills up to speed with their peers. Without practice, skills get lost.
The average hourly wage of private nonfarm workers increased from $24.57 in October 2014 to $24.66.
Sherk told the Examiner, “Wage growth was nothing to write home about … a tick higher than inflation.” Adjusted for inflation, average hourly wages have grown 3.5 percent since December 2007. Since December 2013, they have risen by an inflation-adjusted 18 cents, less than one percent.
As the Examiner’s Joseph Lawler reported, 2014 has seen the highest annual job creation since 1999. The economy will need to see that trend continue in 2015 for other economic indicators to fully recover.
“It’s great to see some signs of pressure on wages, and we hope the month over month wage and payroll index increases are the start of a new trend,” said Madowitz. “The recession was so deep and put so many people out of work that we’ll still need many more months of strong job gains to before we have sustainable upward pressure on wages.”
Overall, the jobs report showed that the economy continued to progress in November. Employment growth should be celebrated, but it is still too soon to say the economy is in a satisfactory spot.
