So how should we interpret it? Job growth was fairly robust, though it fell short of the 300,000 jobs per month we need to get out of our hole. The headline unemployment number went up, as did U-6. This does not reflect an increase in the number of jobseekers. In fact, the employed share of the population actually dipped slightly. Rather, as David Leonhardt explains, it reflects the fact that our estimation of the overall employment level had been overly optimistic. It is also true, however, that job totals for recent months were revised upwards.
Christine Hauser’s report on the jobs report highlights a striking fact:
As has been the case for several months, all of the increase came from private employers, which added another 268,000 jobs last month on top of the revised 231,000 in March, the monthly report said. Results of the previous two months were revised to show another 46,000 jobs were added.
Governments, struggling to balance budgets as they deal with shrinking revenues and growing deficits, cut 24,000 jobs last month. Most of the drop came at the local level, where 14,000 jobs were lost in April after a decline of 15,000 in March.
One conclusion is that if only we hadn’t shed public jobs, we’d be better off. Matt Yglesias makes the case:
Private sector job growth continued apace last month, adding 268,000 jobs in April and with the revised numbers we also added 231,000 private sector jobs in March. That’s not a super-strong recovery, but it’s a volume of job growth that’s faster than labor force growth and thus consistent with a falling unemployment rate. Consistent, that is, if you imagine a scenario in which the size of the public sector keeps pace with the growth in the population. But that’s not happening. America’s population grew in March, but instead of adding public sector workers we shed 15,000. And in April, we shed 14,000 more. All told, we’ve had 1.7 million net new private sector jobs over the past year but they’ve been partially offset by 404,000 net job losses in the public sector.
One question here is the wisdom of this. I think it’s been unwise. In the current low interest rate environment, had the federal government engaged in additional borrowing and then engaged in revenue sharing with state and local government, we could have turned those 404,000 public sector losses into zero net losses without any private sector crowding out. What’s more, had we had fewer public employee layoffs those workers would have spent more money on private purchases in their communities and we’d probably have somewhat more retail employment. Most of all, we’re actually now facing something of an objective shortage of houses in America and absent those missing 404,000 public workers we’d be closer to a revival of the construction industry and thus on the path to long-term recovery.
My view is that state and local governments should never have expanded their workforce so markedly over the last decade, and that we need to (a) raise public sector productivity levels on a continuous basis, (b) work our way towards a level of public spending that taxpayers can sustain over the long term, and (c) reform the way the federal government and state and local governments manage their finances over the business cycle.
In an ideal world, we would only have the public workers we “need” at any given time; the trouble is that our sense of what we “need” varies in response to our income. As firms grow larger, their revenue per employee tends to shrink. This is normally justified on the grounds that new employees are productivity-enhancing, and that they represent an investment in future growth. But of course this is often a speculative proposition. And so the truth is that firms will tend to only shed workers when they have to, e.g., when revenues collapse, when competitors threaten to drive them out of business, etc. Something similar seems to be true of state and local governments. Avoiding layoffs in lean periods creates the danger that the public workforce will only retrench in a crisis even profounder than what we’ve seen in the post-2008 period, when the process will be even more wrenching and when the cuts will have to go even deeper. Because we’re certainly not going to see cuts when times are flush, for the obvious reason that cuts are unpopular.
Another interesting aspect of the jobs report, as summarized by Jeff Cox of CNBC:
Retail created another 57,000, including 27,000 in general merchandise stores.
Leisure and hospitality continued its torrid pace of job creation, adding 46,000 to bring its three-month addition to the burgeoning job market to 46,000.
Manufacturing? There continued to be a slow rise, with 29,000 news jobs recorded, while mining added a net 11,000, most in support positions.
Professional and business services had a sold month, adding 51,000 positions.
The continuing expansion of leisure and hospitality could reflect our uneven recovery. Affluent Americans seem to be recovering. In an age of Plutonomy, this has an outsized impact on consumer spending. Many of these service jobs don’t pay particularly high wages, but we can expect that to change over time as those jobs are, in Richard Florida’s words, “upgraded“:
America and other advanced nations are now in the early throes of a new jobs transformation, which requires an equally imaginative response. It creates two new distinct categories of jobs. The first includes millions of the best jobs America has ever seen: high-pay, high-skill jobs in professional and creative fields. The second, including such routine service work as care assistants and home health aids, retail sales clerks and food preparers, is less good. Pay for such jobs is roughly half that of manufacturing jobs. The result is as simple as it is tragic: a bifurcation of the job market and an increasingly unequal and polarised society.
To address this bifurcation, Florida proposes a new approach to service work:
A successful jobs strategy must, therefore, focus on upgrading this entire job category. Thankfully much service work is not vulnerable to offshoring or automation: we need humans to care for our children and ageing parents, to cut our hair and steam our lattes. But we also need to see service work as a potential source of future profit and innovation. Some private sector organisations, such as the online retailer Zappos, show how this might be done, with their focus on helping service workers move through an internal career ladder from entry ranks to managers of divisions. These companies view workers as a potential source of innovation, and build a culture and community that delivers better services to customers. Others need to learn from them. [Emphasis added]
This is interesting. Though Florida frames his recommendations as an approach to public policy, it could also be seen as advice for firms serving more demanding, more affluent customers with a wealth of consumption opportunities. Later on, he adds the following:
Some of this may mean all of us paying a little more to those who cut our hair and sell us our clothes. But this is exactly what we did a half century ago to spur recovery by paying more to the workers who make our cars and appliances and build our homes.
I’m not sure this Fordist approach is quite how it will work. My guess is that as the ranks of skilled, well-compensated workers in the knowledge-intensive service industries grows, these workers will demand more complex services that will require more training and that will command a higher price.