Employment Reality Check: 200,000 New Jobs Is a Good Start, but Good Times May Still Be a Decade Away

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Companies are hiring again. That’s the good news. The bad news is those hires might not be coming fast enough.

In December, corporate America added 200,000 employees to their payrolls. That hit the magic number economists have been pointing to for months as the rate we needed to declare the current state of affairs a real recovery and not just false hopes. And yet, two and a half years after the official end of the recession, you have to ask whether economists have been setting the bar too low, especially considering the state of Europe and the rest of the global economy. Is 200,000 enough? And if so, is it sustainable? Wall Street, for one, didn’t seem to think so. Stocks were up as the market opened on Friday, but only slightly. What’s going on?

The good news: The unemployment rate fell to 8.5%. That was the fourth month in a row that the jobless number has fallen, and it was the lowest level that gauge of economy has been since February 2009. The drop was also a surprise to economists, who generally thought the rate would rise.

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But even that good news came with some doubt. Some have questioned whether the drop in the unemployment rate is to be believed. Jim Pethokoulis, a blogger for the conservative think tank the American Enterprise Institute, tweeted shortly after the jobs number came out on Friday morning: “10.9%: The unemployment rate (u-3) if the size of the workforce was the same as when Obama took office.” His point is that while the unemployment rate is lower, so too is the size of the workforce. Yes, more people are finding work, but plenty of others are giving up altogether. And a growing number of long-term unemployed people can be a real problem for the economy.

(MORE: Strong Jobs Data Fuels Optimism for the Economy, but Risks Remain)

The numbers, though, at least recently, don’t point to a huge increase in the number of discouraged workers. In fact, the broader measure of unemployment — the so-called U6, which tracks not just those counted as unemployed but also people working part-time who would like to be full-time and those who have haven’t looked for a job in the past month — fell to 15.2%, from 15.6%. As a result, the percentage of unemployed who are considered discouraged actually dropped to 44% in December, from 45% the month before.

The real question is whether 200,000 jobs is enough to turn the nonrecovery recovery into something that feels more like good times again. On that count, 200,000 seems like not so great news. As others have pointed out, even if companies were to continue to hire at that pace, it would take until 2025 before we reached prerecession unemployment levels. But it’s not clear that we will even add that many jobs a month. Bob Doll, the chief equity strategist at Blackrock, the world’s largest money manager, said, “My guess is the direction is sustainable, but not the magnitude. The market is assuming the U.S. is not headed for a boom anytime soon, and I think that is rightly so.”

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The issue is the headwinds just keep getting stronger. Ethan Harris, the top economist at Bank of America, is predicting what he calls a triple dip because of Europe. He sees some growth in the economy now, but as the year drags on, he thinks the problems in Europe will drag us down too. Doll also points out that consumers continue to need to devote a considerable portion of their money to paying down debt — which likely grew during the holiday times — so spending will remain relatively weak. Even emerging markets like China are slowing, which will hurt U.S. exports. With all that, Doll thinks trend GDP growth for the U.S. economy is likely to be about 2.5%. That suggests later in the year, you should expect the economy to ease into a pace of adding about 125,000 jobs a month.

The one thing that would change that prediction is if U.S. employers were instead adding a lot more jobs now — say, 400,000 or 500,000 a month. That would put more money in people’s pockets to spend. It might even boost the U.S. economy enough so that our growth could re-energize the rest of the global economy. But that’s not what we are seeing, and the result is that today’s current jobs-growth news could be as good as we get for a while.