A drop in the unemployment rate and a jump in job creation must count as good news, but this is no time for celebration.

After all, at 8.8 percent, unemployment is still very high,even if the current rate is down slightly from 8.9 percent a month ago, and at the current pace of growth in jobs, a painfully large number of people will be out of work for years to come.

Still, as Michael Powell says on the new Weekend Business podcast and writes in The Times, there are some very positive signs embedded in the Labor Department’s monthly report. Manufacturing, for example, a downtrodden sector that has been in decline in the United States for decades, has been reviving in the economic recovery. Most sectors reported net job gains in March, and they occurred despite several global crises — the turmoil in the Middle East, the disasters in Japan and the debt problems in Europe.

In the United States, it’s tough enough to get a job in the current environment. It’s even tougher to get one that pays a living wage, as Motoko Rich observes in another discussion on the podcast. She talks about a new study, which she covered for The Times, indicating that many working people are unable to make ends meet.
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While the 216,000 net jobs that the economy added last month were certainly welcome, the growth wasn’t nearly fast enough to get the country back on the path to full employment anytime soon.

The Great Recession dug the country’s job market into a very deep hole. As I mentioned in an earlier post, the economy today still has 5.3 percent fewer nonfarm payroll jobs than it had when the recession began in December 2007. If payroll growth continues apace with the gains experienced in March, it will take nearly three years for the economy to recover the jobs lost during the recession.

The chart below shows what this long, slow slog would look like. (The Brookings Institution put together a similar chart a few months back.)

The solid blue line shows the change in employment since the recession started over three years ago. As you can see, the line stops in March 2011, which is the most recent employment data point we have. The dashed blue line shows what employment would look like if the economy added exactly 216,000 jobs each month:

Source: Bureau of Labor Statistics

As you can see, the dashed blue line finally reaches the level of prerecession employment in January 2014 — nearly three years from now.

The dashed green line is one alternative, if unlikely, trend. It shows what job growth would look like if, from here on out, the economy had monthly job growth as strong as it was during the best month of the 2000s — 472,000, the number of jobs added on net in March 2000. Even at that (very optimistic) pace, payrolls would not recover the ground lost during the recession until July 2012.

Even more depressingly, none of this takes into account the fact that the number of working-age Americans has been growing in the last few years, which means that if the economy were healthy it would have more jobs today than it had at the beginning of the recession.

As we’ve noted before, the length of time the typical unemployed person has been out of work has been getting longer and longer. And in March, the duration of unemployment again rose, to an average of 39 weeks:

Source: Bureau of Labor Statistics

That’s the longest on record, even when you account for the fact that the Labor Department changed its methodology for calculating average unemployment duration at the start of this year. (The numbers produced by the department’s old methodology are shown in very light blue in the chart above; as you can see, they’re still higher than they were at any previous month on record.)

So what accounts for the interminable length of unemployment?

Layoffs during the Great Recession were unusually concentrated. Whereas in previous recessions a large swatch of American workers churned in and out of unemployment, this time around the ax fell on relatively few Americans. And as the economy has marched onward, this smaller group of workers has been left further and further behind. Read more…

The latest jobs report was a solid one, as I mentioned in an earlier post. Job growth is picking up speed, reaching 216,000 in March. Rising oil prices don’t seem to be spooking companies, at least not by the week of March 12, when the Labor Department conducted its survey. All that is very good news. Unlike last year’s recovery — which petered out in the spring — this year’s remains alive.

But today’s report was not great, either. Wages did not grow at all in March and have trailed inflation over the last year. The workweek didn’t get any longer; it typically does get longer before a big boom in hiring. And an employment increase of 216,000 is not exactly blistering. At that pace, the unemployment rate would not return to 5 percent for about five more years.

The economy is making progress, but the progress is slow and uncertain.

Last night, I posed five questions to ask about today’s report. I offer some answers below.

1. Has the latest turmoil — oil prices, Europe’s debt troubles, state and local cutbacks — spooked employers?

Again, no. Job growth over the last three months has averaged 159,000, the highest such number (excluding temporary Census jobs) since the recession began, in late 2007.
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Source: Bureau of Labor Statistics. Chart by Amanda Cox. Horizontal axis shows months. Vertical axis shows the ratio of that month’s nonfarm payrolls to the nonfarm payrolls at the start of recession. Note: Because employment is a lagging indicator, the dates for these employment trends are not exactly synchronized with National Bureau of Economic Research’s official business cycle dates.

The United States added 216,000 jobs on net in March, the Labor Department reported today, slightly faster growth than the February gain, which was revised slightly to 194,000. March also represented the 13th straight month of net job gains in the private sector.

Job gains were relatively widespread — nearly ever major sector added employees, or at least kept payrolls flat — but the industries with the biggest gains were professional and business services, health care, leisure and hospitality, and mining. The biggest loser was local government, which has lost 416,000 jobs since its payrolls peaked in September 2008.

Even most of the winners, though, have a long way to go before returning to their prerecession levels, if they ever do.

The chart above shows economywide job changes in this last recession and recovery compared with other recent ones, with the black line representing the current downturn. Since the downturn began in December 2007, the economy has shed, on net, about 5.3 percent of its nonfarm payroll jobs. And that doesn’t even account for the fact that the working-age population has continued to grow, meaning that if the economy were healthy we should have more jobs today than we had before the recession.

The unemployment rate (measured by a different government survey, and based on how many people are without jobs but are actively looking for work) ticked downward to 8.8 percent in February, from 8.9 percent in February. That means joblessness is at its lowest rate in two years. The number may go up again, though, as more discouraged workers return to actively searching for jobs when they hear employers are hiring again.

One of the big questions facing the Federal Reserve is whether the recent rise in oil and food prices will turn into an inflationary spiral. Today’s jobs report suggests that the answer, at least so far, is that there is little reason to worry about such a spiral.

The average hourly wage across the economy — including salaried employees — did not grow at all in March. It was $22.87, just as it had been in February. And from January to February, it rose only a single cent.

Over the last year, hourly wages have grown 1.7 percent. That matches the smallest annual increase since the recession began, in late 2007. In the middle of 2009 — when the economy was still shedding hundreds of thousands of jobs a month — the annual increase was significantly larger: about 2.5 percent.

It’s all but impossible to have an inflationary spiral if wages are not rising rapidly. Companies may want to increase prices because their energy costs are rising, but if customers don’t have the buying power to pay higher prices, most price increases won’t stick.

On the whole, today’s jobs report was a solid one, showing an acceleration of job gains. (And more on them shortly.) But to the extent that Fed officials are trying to decide whether the bigger risk is an economy that may be too strong — with inflation about to soar — and an economy that may be too weak, the evidence from the job market is quite clear. The economy remains years away from full employment, and wages are barely rising at all.

Uwe E. Reinhardt is an economics professor at Princeton. He has some financial interests in the health care field.

On March 23, Senator Ron Johnson, Republican of Wisconsin, marked the first anniversary of President Obama’s signing into law of the Affordable Care Act of 2010 by publishing a commentary in The Wall Street Journal, “ObamaCare and Carey’s Heart.”

He began with a touching celebration of the life-saving operation that had been performed some 27 years ago by highly skilled surgeons on the senator’s young daughter, who was born with a serious heart defect. He noted that this undoubtedly expensive operation had been financed by a “run-of-the-mill plan available to every employee of an Oshkosh, Wis., plastics plant.”

His commentary suggests that he views this “free market” approach to financing health care as the foundation of our health system’s remarkable innovations and achievements.

Senator Johnson’s commentary then veered into a sharp broadside aimed at the Affordable Care Act of 2010:

I don’t even want to think what might have happened if she had been born at a time and place where government defined the limits for most insurance policies and set precedents on what would be covered. Would the life-saving procedures that saved her have been deemed cost-effective by policy makers deciding where to spend increasingly scarce tax dollars?

Not surprisingly, this comment elicited much critical commentary, some of it needlessly vehement.
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The Labor Department will release the March jobs report at 8:30 a.m. My colleague Michael Powell posted his preview of the report earlier this evening. These are the five things I’ll be looking for first:

1. Has the latest turmoil — oil prices, Europe’s debt problems, state and local cutbacks — spooked employers?

Over the last three months for which there is now data (December through February), the economy has added 135,000 jobs a month. That was almost exactly the pace of job growth in the spring of 2010, before a combination of events — Europe’s debt troubles, above all — stopped the recovery in its tracks.

Is this year’s recovery in similar jeopardy? A gain of 200,000 or more jobs in March would suggest no. A gain closer to 100,000 would offer reason for worry.

2. Is there reason to believe the Labor Department might be undercounting job growth?

The numbers above refer to the government’s estimate of job growth based on its survey of employers. But the government also surveys households each month. Generally, the employer survey is more accurate, because it’s much larger. At turning points, however, the household survey can be more accurate, because the employer survey often fails to capture the creation of new companies (or the closing of failing ones).
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Maybe, just maybe, this is the month the job number pops.

The March job report will be released Friday morning, and quite a few economists, to the extent that they can be drawn into such discussions, are betting on a number just short of 200,000.

It’s not hard to understand that bet. The weekly unemployment claims have declined steadily, from the mid-400,000s to the neighborhood of 385,000. In almost any other context, the latter would be a grim number indeed. But in this slowest and most sluggish of recoveries, it is a sign of somewhat fewer layoffs.

And the unemployment numbers for February offered signs of hope as well. The economy added 192,000 jobs, and the 12th consecutive month of gains by companies. A comparable gain in March would provide the strongest two-month performance since last spring, when short-term Census hiring was driving the trend and private sector hiring was still weak.

“I suspect tomorrow will be the first time I use ‘traction’ and ‘momentum,’ ” said Heidi Shierholz, an economist at the liberal Economic Policy Institute. “I suspect that the workers on the sideline will start coming back in.”
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American workers weren’t the only ones sacrificed by the Great Recession. Start-ups suffered, too.

A new paper from the Federal Reserve Bank of Cleveland tracks various measures of entrepreneurship over the last few years. It found that the number of businesses with employees — one indicator of entrepreneurial activity, like self-employment — took a nosedive.

The chart below shows the number of businesses in the United States, adjusted for population growth.

Scott Shane, “The Great Recession’s Effect on Entrepreneurship,” Federal Reserve Bank of Cleveland.

As you can see, the population-adjusted number of businesses began falling even before the recession officially began in December 2007. But once the downturn hit, the number of businesses began falling precipitously.

Some of that decline was because of business failures. But it was primarily tied to the lack of new business formation. The report’s author, Scott Shane, writes:

68,490 more businesses closed in 2009 than in 2007, an 11.6 percent increase in the business closure rate. But in 2009, 115,795 fewer employer businesses were founded than in 2007, a 17.3 percent decline in firm formation.

The financial crisis held back new business formation in many other countries, too, as documented by this paper presented last fall at the Federal Reserve Bank of Atlanta.

Given these findings, it is perhaps no wonder that the job market is still so poor.

Young businesses (not small businesses, despite what politicians may tell you) are the biggest engines of job growth. With so few businesses forming, hiring is staying very depressed. And the main problem in the job market is not layoffs — which are at a record low — but new hiring.