Just to keep up with the natural growth rate of the job market, the economy needs to add at least 150,000 jobs a year. For the past 12 months, it has averaged 175,000 a month, enough to bring down the unemployment rate steadily, but not impressively: that rate was 8.2 percent a year ago. It fell to 7.5 percent in April. But in May, it rose again to 7.6 percent, even as the economy added another 175,000 jobs.
Numbers for March and April were revised from a total job creation of 303,000 to 291,000, a small decline that nevertheless contributed to the uptick in the unemployment rate. In sum, the economy is continuing its anemic pattern of adding barely enough jobs to sustain what looks like a recovery, but not enough jobs to restore the economy to a strong, confident footing. And troubling news continues to cloud the future.
The federal sequester’s across-the-board spending cuts began on March 1, with 14,000 federal government jobs lost in May. That’s just the hard numbers. The sequester is also causing states to scale back their social programs, including unemployment compensation. That puts less money in circulation, leading to more businesses hurting for customers. Florida is among the states that are cutting the number of benefit weeks available to the unemployed.
The labor force rose by 420,000 to 155.7 million, with the difference between that increase and actual job creation helping to push the unemployment rate up. The labor force participation rate increased by a decimal point, to 63.4 percent, but it remains below where it was even at the beginning of the year, and far below where it was for most of the previous decade, at around 66 percent. Same story with the employment-population ratio, which was 58.6 percent in May, same as in April, and well below its pre-recession peak of 63.4 percent in December 2006. A lower ratio means that fewer people are joining the labor force. That may have to do with discouraged workers. But it also has to do with an uptick in retirees: the baby boom generation began retiring, and as those numbers gain momentum, the employment to population ratio will have a harder time climbing, especially with slower immigration.