Yesterday, the Bureau of Labor Statistics reported that the unemployment rate had dropped to 7% for the first time in five years, based on November numbers. American employers added 203, 000 jobs. But, by contrast, looking back to when the U.S. was truly prosperous, what was "normal" then? The answer is a jobless rate of well under 5%. It is an illusion to claim that America has returned to prosperity, when the job market is still in a shambles.
Many economists say that the trouble with the present jobs market is that so many people are underemployed, and millions have left the job market altogether. The real picture is bleaker than that. From December 2005 to November 2007, there was not a single month when unemployment rose above 5%. In three of those moths, the rate was only 4.4%.
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Maybe the Great Recession was so deep that an unemployment rate well above 5% is the "new normal" A year ago, the Fed, particularly its chief Ben Bernanke, said the central bank had to keep interests low until the jobless rate dropped to 6.5%. If that is a benchmark for a robust recovery, then the jobs numbers of just seven years ago have lost their meaning.
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One critical figure which did not make the headlines about the jobs report is that the number of unemployed persons was 10.9 million. How can that be put in perspective? According to 2012 Census estimates, the four largest cities in the U.S. after New York--Los Angeles, Chicago, Houston, and Philadelphia--together had 10.3 million residents. By that yardstick, the pool of jobless Americans is massive.
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And, also buried in the coverage of the data was the other set of measurements about the fact that the job market is still grim:
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) fell by 331,000 to 7.7 million in November. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.
In November, 2.1 million persons were marginally attached to the labor force, down by 409,000 from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.
As the media and experts cheered the 7% and 202,000 numbers, it became clear that the real measure of job health had become clouded.