This has been a mixed week for economic news. On the positive front, the Bureau of Labor Statistics announced that the economy added 288,000 jobs, bringing the unemployment rate to 6.3 percent, the lowest since 2008 (see New York Times coverage here). While this would appear to provide evidence that things are, in fact, improving, there are some important caveats: 806,000 exited the labor force, bringing the labor participation rate down to 62.8 percent. Moreover, there is an interesting disjunction between the two sources of data on unemployment: the Establishment Survey figures of 288,000 new jobs does not match the more volatile Household Survey that reports a loss of 78,000 jobs (see Zero Hedge for some additional commentary and Vox for a nice overview of the differences between the two surveys).
I would be surprised if these numbers hold up once the revisions are in. The simple reason: they don’t fit with some bad economic news released earlier this week.
On Wednesday, the Commerce Department’s Bureau of Economic Analysis reported that the economy has essentially stalled, generating a 0.1 percent annual growth rate in the first quarter. As Megan McArdle commented on the GDP report:
the fact remains that we seem to be stuck. Six years after the financial crisis, we still haven’t entered anything that could really be called a “recovery.” A recovery would mean some sort of catch-up growth that reabsorbed stranded workers and capital. Instead, we’re barely limping forward, and the most cheerful thing we can say about any of it is that at least we’re no longer falling back.
For once, Megan McArdle may be the optimist. As Ylan Q. Mui (Wonkblog) notes: many are suspecting that when all the adjustments have been done, we may learn that the economy actually shrank. Newly released Census Bureau data on construction spending was far weaker than expected: “instead of the 0.2 percent boost in private nonresidential construction spending assumed in the GDP calculation, there was likely a 5.7 percent decline.”
Bottom Line: Even if economic growth is as reported on Wednesday (.1 percent), it is hard to see how this anemic performance could generate 288,000 new jobs—the best performance since January 2012. I am assuming that revisions will be forthcoming.