February Job Growth Barely Made Dent in Record Low Labor Force Participation
Newest government data still show trends of low wage job creation, racial disparities in employment, and workers continuing to leave the labor force, says economist Bill Black
KIM BROWN: Welcome to The Real News Network in Baltimore. I’m Kim Brown.
Recent government figures show that the national unemployment rate dropped by .1 percentage point in February, to 4.7%. The data also show that about 235,000 jobs were created that month alone. Republicans tried to give the credit to Donald Trump for the reportedly surprising gains. While Democrats argued that Trump merely inherited the fruits of Obama’s economic policies. The new figures have raised expectations that the Federal Reserve will raise interest rates by a quarter of a percentage point.
Joining us now, to have this conversation more in depth, we’re joined with Bill Black. He is a professor of both law and economics at the University of Missouri at Kansas City. He’s also a former financial regulator and a white-collar criminologist. He’s joining us today from Kansas. Bill Black, welcome back to The Real News.
BILL BLACK: Thank you.
KIM BROWN: Bill, who and what is responsible for these unemployment and job figures?
BILL BLACK: Well, overwhelmingly, the economy is responsible for the economy, as opposed to either president, or any prime minister. The United States has had a sustained moderate recovery for about six and a half years. So, the number is broadly in line with the trend under President Obama. It came in a little bit above expectations, which is a good thing. Much of the conventional economics world, Paul Proudman, has a column about this, says, “See, we’re all… we’re already very close to full employment. Now we’re right about at it. And we need to start worrying about inflation.”
As you mentioned, the Federal Reserve, it’s now viewed as a near certainty, unless some catastrophe hits at the first part of this week, that they will raise interest rates, and that it will be the first of a series of increases in the interest rate. There was also some good news, in that wages increased. One of the terrible things about the recovery is that wage growth has been extremely poor, until about a year ago.
Again, the wage growth was broadly in line with the trend over about the last year, and perhaps year and a quarter, of the Obama administration. So, workers are still way behind on wage increases. And unless there’s a real tightening of the labor market, they’re likely to stay behind for some considerable time period.
KIM BROWN: So Bill, you know, part of the reason why this month’s labor numbers are a story, is because the Trump administration is obviously taking credit for the number of jobs being added to the economy, and for the low unemployment rate. I believe the White House is calling this the Trump effect.
However, when these similar numbers were happening, and also being released by the Bureau of Labor Statistics while Barack Obama was still president, then-candidate Trump was pooh-poohing these numbers, saying that actually the real unemployment rate is somewhere, 35 – 40%. And that these are somehow, fraudulent numbers that were being manipulated by the Obama administration. He’s not saying that this month.
BILL BLACK: Yes, we are all shocked that he lied. (laughs)
KIM BROWN: Well, I mean, it’s more than just a lie. Because I mean, this is something that Donald Trump has been doing ever since he gained office. Which feels like many years ago — although it’s only been less than two months — that that stuff that he would freely criticize President Obama and his administration for, he doesn’t seem to look at it through the same prism, now that it is he in the Oval Office.
BILL BLACK: Again, he has no care about the truth. He was lying before, he lies routinely, he doesn’t know how these numbers are calculated. They were never phony numbers. But here’s the real policy issue for all of us. First, the recovery is very uneven. About 60% of the jobs created in the recovery, are low wage, and relatively shorter workweek jobs. In other words, the quintessential new job is working in a restaurant. Right?
And overwhelmingly, those jobs went to people who had college degrees, or at least an associate degree. Now, there’s no need for those degrees to be able to do the job, but employers use that as a screen. And that means that we’re bifurcating the nation again, not on the basis of merit needed for the particular job. But if you can’t get your kids at least an associate’s degree, and better yet a four year university degree from a real university — as opposed to these rip off, private places — then your kids forever are going to be at an enormous competitive disadvantage.
And of course, the racial effects of all of this continue, so unemployment rates for blacks are about twice as high. So, that’s one area that needs to be worked on, and Trump is so busy claiming credit, to a greater extent. But not totally unlike President Obama claimed credit for the same kind of numbers. As I said, that they’re ignoring that effect, and none of us expect Trump to talk about that effect.
The second aspect of all of this, is that many people have indeed dropped out of the labor force. Record numbers of people have dropped out of the labor force. And when you drop out of the labor force, you’re no longer looking for work; you’re no longer counted as unemployed. And so, the ratio of Americans in the normal group that works, you know, say up to age 65, that is actually in employment, is near record lows, and as America ages… (audio drop) …worse.
So, there’s a lot more slack in other words, in the economy, where more of these people could be induced to come back into the labor force. And so, there is a technical question, an important one, and I’m suggesting it’s just for weird number purposes. Is it possible to bring 5 million people back into the labor force that have been so discouraged that they left?
If so, well, then all kinds of things get easier in life, and productivity might grow. And, again, now a caution on all of this — I’m about to give you the neo-classical economic answer –- is productivity growth, is supposed to show what wage growth will do that doesn’t cause inflationary pressures. So, productivity growth is a really good thing for workers, supposedly.
Now, you heard me say that it wasn’t for about six and a half years, that the productivity growth was much larger than the wage growth. Wages have been held suppressed in part, because so many people were unemployed. But also because so many people had left the labor force, and because you could simply have the job — not restaurant jobs, that’s why they grew — but other jobs you could outsource to other countries.
So, neither President Obama, nor the numbers that President Trump produced, would do much of anything to cut into that number that has dropped out of the work force. And as I said, do something major, which would be in the order of bringing, say, 5 million people back into the labor force. That’d be a real enormous step, and there’s nothing right now on the table, of course, that Trump would do, that even has a potential of bringing those people back into the labor force.
KIM BROWN: Bill, let’s talk about another aspect of this with the low unemployment rate, and the number of jobs being added to the economy. What effect will raising the interest rate have on a future unemployment rate, and prospects for job creation?
Because there’s a lot of talk coming out of Washington, that there’s a good chance that Janet Yellen, the Chair of the Federal Reserve, will make the recommendation that interest rates be raised.
BILL BLACK: Well, first, she will. There’s no ifs, ands or buts. Again, absent some economic calamity in the next couple of days that nobody anticipates, she will do exactly that. She has made that abundantly clear. And the criticism of Trump in the past was that she wasn’t raising interest rates.
Now, of course, the last thing he wants is increased interest rates, because increased interest rates, one, all by themselves, are likely to slow growth. And, two, they would push up the value of the dollar, relative to other currencies. And as the dollar is worth more compared to other currencies, it gets harder to export our goods — all other factors being held constant — and we are more likely to import additional goods.
Now, Trump, of course, has raged at the trade deficit. And this would tend to increase the trade deficit, and wonkish folks may recall that about three weeks ago, at 3:00 a.m., he called up Flynn — his now-disgraced and resigned National Security Advisor — to ask him whether a strong dollar was good or bad for trade. (laughs) The National Security Advisor, instead of the economist. Right?
So, Trump is lazy. He doesn’t understand… the craziest thing is people… you hear this all the time, well, he’s a… a businessman, so he understands these things. No! He doesn’t understand even the absolute basics of economics.
So, he… you can bet, as soon as he gets the first discouraging job numbers, he’s going to blame it on Janet Yellen.
KIM BROWN: Indeed. Well, Bill, we will certainly have this conversation, when and if Ms. Yellen does decide, or the Federal Reserve decides, to raise the interest rates, which according to you is imminent. We appreciate your time and your expertise today. Thank you.
BILL BLACK: Thank you.
KIM BROWN: We’ve been speaking with Bill Black. He is a former financial regulator and a professor of law and economics at the University of Missouri at Kansas City. And we thank you for watching The Real News Network.