A Policy Response to Job Market Weakness

Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities in Washington and a former chief economist to Vice President Joseph R. Biden Jr.

Well, as if the seemingly never-ending winter wasn’t bad enough, Friday morning brought another disappointing jobs number from the Bureau of Labor Statistics.  Economists expected 180,000 jobs; we got 113,000.  Last month at this time, we expected 200,000 payroll jobs, we got 74,000; we expected that 74,000 to be revised upward, and it was … to 75,000.  In other words, our expectations were again dashed, leading one to wonder if this word expectations means what we think it means.

As I always say before I read too much into it, don’t read too much into one month’s report.  And, in fact, not too far beneath the surface there are some better signs.  The government has been a major source of job loss over the past two months, shedding 43,000 cumulatively at all levels (federal, state, local).  Ergo, private payrolls were up 142,000 in January and have increased by an average of about 170,000 a month over the past three months, compared to about 190,000 in the prior three months â€" still a deceleration, but a lesser one compared to the total (that’s down from 200,000 to 150,000 using the same monthly averages).

Also, the statistically noisier household data did a lot better this month, with a nice little pop of 20 basis points to the depressed labor-force rate, a tick down in unemployment (for good reasons, not due to labor-force exits) and 500,000 fewer people working part time for economic reasons.  (If I were a political operative I’d tie these results to the Affordable Care Act, since they are diametrically opposite the direction claimed by critics, but instead, I’ll point out that virtually all of the noise about the near-term impact of health care reform in the jobs data, pro or con, is bunk.)

So, after the throat-clearing, let’s cut to the chase, shall we?

Maybe there’s yet another head fake underway in the job market, maybe not. But even if this recent deceleration is ephemeral, just the fact that we’re seeing it at all and wondering about its staying power indicates the persistently weakness of this labor market recovery.  So, while wringing hands over dashed expectations, let’s also ask what could be done to hasten the job market recovery.  Please, for a moment, suspend your correct judgment that our benighted Congress will consider little to none of what follows:

Stop hurting the recovery with fiscal drag or threats of a debt ceiling standoff.  First off, do less harm.  There’s a time for cutting budget deficits, but it’s not while we’re still trying close output and job gaps that have been with us since the recession began in late 2007, which is a pretty long time ago. Also, it would be a large and foolish mistake to stage another debt ceiling fight when, if anything, signs of economic fragility may be resurfacing.

The little budget deal made at the end of last year helps a bit on the fiscal front by replacing some sequester cuts, but then there’s this:

Quickly replace the expired unemployment insurance benefits with another extension.  While long-term unemployment came down a bit last month, we still began the year with 2.3 percent of the labor force unemployed for at least half a year, more than double its pre-recession level and well above the level when past Congresses have allowed extensions of unemployment insurance to expire.  This expiration is thus bad macro (fiscal drag) and micro (labor demand is still well below labor supply).

Implement a bold jobs measure. (As I said, suspend disbelief for a minute.) A significant infrastructure program, like Fix America’s Schools Today (FAST!), an employer-side wage subsidy, or a subsidized jobs program aimed at the long-term unemployed.

O.K., you can stop pretending.  As I said, there will be less fiscal drag this year than last, and while the extension of unemployment insurance just failed in the Senate, it fell short by only one vote, and Democrats will continue to raise the issue (of course, then there’s the House).  I can’t imagine a bold jobs measure coming to fruition any time soon.

But think about this: remember how a few months ago, Senator Elizabeth Warren, a Massachusetts Democrat, talked about raising Social Security benefits, as opposed to cutting it â€" and shouts of “hurrah” were heard across the nation (along with some boos, of course)?  We need to hear the same thing on one of these (and some other) big ideas to increase employment.  Even if these last few months of jobs numbers are revised upward or we return to the earlier trend, most forecasts don’t see full employment for at least three to four years, and most forecasts have been found to be consistently too rosy.

I’d like to see someone step forward and say they’re as tired as I am â€" and I’ve got a good job â€" of seeing month after month of underwhelming jobs numbers as families struggle to get ahead.  And even though the politics isn’t there, they’re going to fight for a big, good idea until it is.