Simon Dawson/Bloomberg
If you like statistics involving arbitrary round numbers—and who doesn't?—here's a good one. For the first time since early 2000, the economy has added over 200,000 jobs for five months in a row. Furthermore, June's 288,000 net new jobs were enough to push unemployment down to 6.1 percent, its lowest level since September 2008.
By our diminished post-crisis expectations, this was about as good as a jobs report gets. Unemployment fell for the good reason that more people were getting work rather than more people were giving up, as the labor force grew by 81,000. Revisions, which tend to be pro-cyclical, added another 29,000 jobs to the previous two months. And the 2.5 million jobs the economy has added the past 12 months make it the best year of the recovery so far.
And, as you can see below, the 3-month average of job growth—271,000 now—is almost the best of the recovery, too. The only times it's been better were after the Census hiring temporarily boosted the numbers in 2010, and when the economy briefly looked like it was achieving escape velocity in early 2012.
But, as Neil Irwin asks, is this time different? In other words, will this latest jobs boom turn out to be just another blip, or will it be the start of a new and faster phase of the recovery?
Well, one reason for optimism is something that sounds (and is) profoundly boring, yet is still important: seasonal adjustments. See, the jobs number you hear isn't the actual number of jobs the economy has added. It's the number of jobs the economy has added compared to how many it's expected to at that point of the year. The idea is that the economy pretty predictably adds more jobs during some times—say, Christmas shopping season—than others, so we need to adjust the raw numbers to get at the economy's underlying strength.
But the problem is that the financial crisis messed up these seasonal adjustments for a few years. That's because the worst job losses happened in the winter of 2009, and our seasonal models, which didn't know about Lehman but did know about the calendar, naïvely assumed it had to be due to the weather. So these models started adding more jobs than usual to the next few winters to make up for what they thought was the new pattern of massive job losses in January and February. That's why it looked like job growth was surging every winter, and crumbling every summer—because the models were adding more to the former and subtracting more from the latter.
And that's also why the upswing in January 2012 was so different from the one today. Back then, it was mostly a statistical mirage. But today, these seasonal distortions have faded and the recovery is real—or at least realer. Car sales, for example, just grew at their fastest pace in eight years, and unemployment is falling far faster than policymakers predicted. Indeed, just a few weeks ago, the Federal Reserve forecast that unemployment would be 6.0 to 6.1 percent by the end of the year. It's 6.1 percent already.
But the big question is whether this will be enough to bring back the shadow unemployed. It hasn't yet. In June, there were 275,000 more people working part-time for economic reasons. And though it sounds like good news that long-term unemployment fell by 293,000, it probably isn't when you consider that, as Ben Casselman shows, most of them are giving up rather than finding work. In other words, there's still plenty of shadow slack, and that probably explains why average hourly earnings have barely kept up with inflation, up just 2 percent the past year.
The good news is that gives the Fed plenty of scope to keep rates low, and, hopefully, help support a stronger recovery that reaches more people. The better news is that it finally might, just might, be starting to already.