The Mysterious Labor Market

Gene Sperling is unhappy with reporter’s and commentator’s rosy view of the labor market.  Better than expected is not necessarily the same as good:

Are We Lowering Our Standards for Job Growth?, Gene Sperling, Bloomberg: … the 207,000 gain in jobs in July beat both market expectations and was a vast improvement over typical monthly job growth during this recovery. Yet … there has been a disturbing tendency among both commentators and the news media to start using the terms ''better than expected'' and ''good'' without distinction. It seems that everyone got so used to dismal job growth -- and even job losses -- in the first 18 months of this recovery that diminished expectation led many to cheer any report that was into six digits. Consider the following: during the previous four recoveries that lasted 44 months or longer, job growth averaged … 285,000 jobs a month. But job growth in this recovery has been a fifth that rate … only 66,000 jobs a month. … I don't claim to fully understand why job growth has been so weak. … why is this job recovery weaker than all other job recoveries? ...

There may be a number of mutually reinforcing factors that have discouraged employers from bringing on new full-time workers. … we have seen increased risk and uncertainty in the fiscal health of the U.S. economy. … rising labor force competition overseas, especially from China and India. … rising costs for health insurance and benefits. … these concerns have pushed companies to go to even greater lengths to boost productivity by squeezing more out of investments in computers and other technology 

Dare we call it a labor market “conundrum?”  I’d rather not, I’m getting tired of that word, but it is a mystery and solving that mystery is an important task.  Labor typically lags behind output in a recovery, but the lag seems to have increased even further this time.  Until we understand why this has occurred, designing policies to address labor market problems will be difficult.