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Job market improves, but may have more to do with weather

04.17.13

APRIL 2013, LEHIGH VALLEY Edition of The Union News

Job market improves, but may have more to do with weather

BY PAUL LEESON
THEUNIONNEWSABE@AOL.COM

REGION, March 20th- The decline in the national unemployment rate has more to do with a drop in the labor force participation than a huge inprovement in the economy. The Labor Department reported recently the economy added 236,000 jobs in February, with a small downward revision in job growth over the prior two months.

The employment-to-population ratio (EPOP), was unchanged at 58.6 percent, exactly the same as the rate in February 2012 and 0.4 percentage points above the summer of 2011. This compares with an EPOP of 63.0 percent in 2007. The 54.8 percent employment to population ratio for women is 0.2 percentage points above the low hit last month.

According to Dean Baker, co-director of the Center for Ecomomic and Policy Research (CEPR) in Washington, DC, an progressive economic think-tank, the decline in labor force participation in this cycle has been striking.

While the unemployment rate has dropped more than 40 percent of the way back to its pre-recession level, the unemployment-to-population ratio is still far closer to its trough than its pre-recession peak. While women have fared better than men, this is because they did not see the same sort of steep hit to employment at the start of the downturn. In the last couple of years the gap in performance has been closing with the EPOP for men rising and the EPOP for women drifting lower.

Also, African Americans have fared much worse than whites in the downturn. The fall in the EPOP for black women has been almost as sharp as for men. The drop in the EPOP for black men has been by far the sharpest. Their EPOP has edged up slighly in the last two years but is still almost 8 percentage points below the pre-recession level, Mr. Baker stated.

Among the big jobs gainers during the month of February was construction, which added 48,000 jobs after adding 25,000 in January. Given the uptick in housing the economy should expect to see more construction employment, but this jump was likely driven in large part by unusually good winter weather. Good weather likely also contributed to the 23,700 jobs added in retail after an increase of 29,000 in January.

The healthcare sector added 32,000 jobs, offsetting a weak rise of 13,000 in January. Restaurants added 18,800, roughly their average over the last year, while the employment services sector added 21,100 jobs. Mr. Baker stated this could be a sign of increased permanent hires in the future, but may also just be an anomaly. The motion picture industry added 20,800 jobs.

The CEPR reported there was some modest good news on the wage front with the average hourly wage increasing at a 2.85 percent rate in the last three months compared to the prior three. This would indicate some acceleration and actual real wage growth, but it is too early to assume the pattern with continue.

The EPOP with less than a high school degree is almost back to its pre-recession level. It rose by 1.9 percentage points in February to 41.9 percent. This compares with a 43.3 percent average for 2007. As the aging of the population is a factor depresses EPOP the decline should show up clearly among those less than a high school degree since these are disproportionately older workers.

The fact that EPOP’s have not fallen much for this group suggests that the aging of the population is not an important factor behind declining EPOP’s.

Mr. Baker added that the new jobs reported for February is a good sign but there is the risk that this is being driven by unusually good winter weather. This could lead to a situation like we saw last year with the very weak job growth in the spring as the result of hiring being pulled foward.