The Employment News

Establishment Employment rose by about 75,000 in May (compared with April), a result that disappointed many commentators. And, I agree that it's slow growth in employment. If one looks, however, at the 12-month growth rates in employment, May 2006 is 1.4% above May 2005. This way of looking at employment growth--comparing the most recent month's data to the same month one year earlier--suggests a remarkable sameness to the moonth-over-year-ago growth in employment. Since the moddle of 2004, employment growth over a year before has never been less than 1.3%--and never more than 1.7%. This is remarkably stable employment growth over a two year time period.

It is, also, remarkable for a recovery not to have generated more rapid employment growth. Since 1960, we've had six sustained business cycle recovery periods. In the first four (early 1960s, early 1970s, mid-1970s, and mid-1980s), employment growth peaked at between 4.5% and 5.5% (measured over 12-month periods). In the mid-1990s recovery, employment growth peaked at about 3.5%. This time, it's peaked at about 1.5%.

To be sure, the decline in employment was also smaller in this recession, bottoming out at about 1.5%--not much larger than the early 1990s declines (about 1.4%) and cosiderably smaller than in earlier recessions (2.5%). But I don't think one can say that employment growth in this recovery has been robust. The declines in unemployment rates stem largely from a declining labor force participation rate, and rising employment has yet to put upward pressure on wages--this is the first recovery in the last 50 years in which real wages have not increased.

Again, the stability of employment growth (over moving 12-month periods) has been remarkable for the last two years. The only comparable period is from mid-1993 to late 1995, when 12-month growth in employment was consistently between 2% and 3%. So the last two years has been remarkably stable, but not remarkably good in terms of employment growth.