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July job growth blistering by 'new normal' standards, but we need to raise our expectations
Adding 209,000 outpaces population growth, but in a real growth economy it would be pretty pedestrian.
A Wall Street Journal survey of economists in April 2016 concluded that the economy needs to add 145,000 jobs per month just to keep up with population growth. So even if you recognize a floor of 145,000 - below which you're actually adding to unemployment - the economy's July performance of 209,000 jobs added is decent. I've heard estimates that the actual number needed is as high as 200,000, or as low as 80,000.
It's not an exact science, but what we can say with confidence is that a six-figure job growth figure you hear on the news is often not as spectacular as the number might appear. Consider how many states and how many local communities that figure is spread across. On a per-town basis, 209,000 new jobs doesn't amount to very much. It's better than nothing, but as you think about it you quickly realize that in a country this size, 209,000 new jobs is not that many.
But that's where we stand after eight years of the Obama new normal. We're willing to get excited about awfully small favors:
The U.S. economy added 209,000 jobs in July, according to government data released Friday morning, surpassing economists' expectations and suggesting the economy continues to thrive after an extended streak of job gains in recent years.
The unemployment rate ticked down to 4.3 percent, compared with 4.4 percent in June, and wages rose by 2.5 percent from the year before to $26.36 in July.
"It was pretty solid across the board," said Michael Feroli, chief U.S. economist at JP Morgan. "It suggests there is really no slowing in the momentum of the labor market."
President Trump greeted the report as evidence of his administration's success, tweeting Friday morning, "Excellent Jobs Numbers just released - and I have only just begun."
Much in line with my piece this morning about GDP growth, America has to reorient its thinking when it comes to understanding the pace of job growth. We're so used to slow growth that we actually celebrate when we do a little better than the bare minimum required. We need to aspire instead to kind of growth we saw during the Reagan Administration, which saw the creation of more than 16 million jobs at a time when the population was smaller. Contrast that to the Obama presidency, which saw more people added to the food stamp rolls than to payrolls, and you can see how we've lost our way when it comes to assessing good or bad job growth.
And the key here is workforce participation. The U3 unemployment rate is insanely low - now clocking in at 4.3 percent - but that's a tremendously misleading figure because workforce participation is barely at 63 percent. That's why companies who are trying to add workers are having a hard time finding good ones. Too many of the people they would otherwise like to hire have been out of the workforce and are ill-prepared to step in perform at the level companies require.
There are all kinds of reasons for that, and you can lay a lot of them at Obama's feet. From making it so easy to get on Medicaid to expanding food stamp enrollment, to forcing health insurers to keep 26-year-olds on their parents' health plans when they should be working and getting their own, Obama provided all kinds of disincentives to work, and a crucial subset of the population resopnded to the incentives exactly as you might imagine. Meanwhile, ObamaCare made it more costly for companies to hire people and incentivized them to keep their payrolls low.
We can turn all this around, but it requires a lot action that the present Congress seems disinclined to take as long as every measure is held hostage to the whims of Susan Collins, Lisa Murkowski and John McCain.
If we could do so, however, we could get to the point where 250,000 new jobs in a month would be considered a given, and we're not really celebrating until we create between 350,000 and 400,000 - or even more.
These achievements are there for the taking. During election years we often imagine that full Republican control of Washington would enable all this to happen. Then we get it, and we discover that actual Republicans and not really that much like the ones we imagine. Complain about the chaos inside the White House all you want - if that's really what it is - but Donald Trump is not the one refusing to make this happen.
Don't take your eye off the ball that really matters.
Dan's new novel, BACKSTOP, is a story of spiritual warfare and baseball. Download it from Amazon here!