Bring On the Discouraged, the Grads and the Census.

With the start of a new month come new jobs numbers. The unemployment rate remained constant at 9.7% while the economy on the whole added about 162,000 jobs. Clearly, in the middle of a recession, adding any new jobs is a good sign but like previous months the numbers must be taken with a grain of salt. A number of factors will combine to cause the unemployment rate to remain elevated in the coming months as the economy begins to recover and continues to add new jobs.

First, as I've said in previous blogs, the unemployment rate is not likely to drop anytime soon even though jobs are slowly being created. During the current recession, the calculated unemployment rate topped out around 10% even though it should have gone much higher. Huge numbers of people either stopped looking for work and dropped out of the labor force or decided to take on less desirable part time work. A more accurate judge of the labor market during this recession was the underemployment rate which added these people into the unemployment rate. This number reached into the high teens and is still around 17%. That means 1 out of 6 people in the United States want more work than they have. Though this number has improved, it is still significantly above the norm.

Another important thing to consider when thinking about the US labor picture are those who are about to graduate from college or high school and enter the labor market. This seasonal event is considered when the overall unemployment rate is calculated. However, the high unemployment amongst the young is another cause for concern. The future labor force is seeing its skills stagnate as many new graduates are sidelined. Unfortunately, while 162,000 new jobs have been created, the economy has still lost jobs since the start of the recession while the population as a whole has increased. Additionally, many graduates have decided to delay their entrance into the labor force when they could not find jobs by continuing in school. This may further bloat the number of new entrants into the labor force over the coming months.

Lastly, there has been one employer who has been adding workers at a breakneck pace - the Census. The government is hiring vast numbers of people for the decennial population count. Yes, giving these large quantities of workers a job is great, however these jobs will not last. For the most part, these jobs are low paying and temporary. The silver lining is that adding these workers temporarily might be just enough to give them work until the recession ends and enough new jobs are created for them to move to permanent positions.

The current employment picture is unclear. There are clearly signs that the economy is improving and that people will move off of unemployment rolls into new work. However, the picture is also very fragile. Many new people are about to join or return to the labor force while many others have moved into temporary work. If enough new, permanent jobs are created in the coming months the economy will recover. But, if permanent positions are not forthcoming the overall economy has the potential to fall again.