What to Watch in the Jobs Report

This post originally appeared on Bloomberg View.

The monthly U.S. jobs report -- scheduled to be released Friday -- will inevitably attract a lot of market attention, economic reporting and political commentary. Allow me to pile on pre-emptively with four pointers:

1. Pay more attention to the details than to the headline numbers.

Consistent with past behavior, markets will focus on the monthly change in nonfarm payrolls and the unemployment rate, with immediate reactions depending in large part on whether consensus estimates -- currently 215,000 for net new jobs and a slight decline in the unemployment rate to 6.6 percent -- are validated. Yet as popular as these numbers are, their information content is not as good as it used to be, and no longer commensurate with how they are treated.

Policy makers -- particularly at the Federal Reserve, which is shifting to a more holistic assessment of the labor market -- will focus more on the details of the report. Two metrics are notable: long-term unemployment and the "U6" unemployment measure, which captures part-time joblessness and those who want work but aren’t actively searching for it. Both have remained at stubbornly high levels. As of March, some 3.7 million people, or 36 percent of the unemployed, had been out of work for more than six months. U6 unemployment stood at 12.7 percent.

2. If you must focus on the headline numbers, remember some important qualifiers.

To reinforce America’s economic recovery, monthly job creation needs to be spread broadly across sectors (and, in particular, not concentrated in the sectors most affected by bad weather in previous months). More important, the unemployment rate -- which counts only people who are actively looking for work -- shouldn’t reflect a further decline in the measured labor force. At 63.2 percent, the share of the population in the labor force is still hovering near its lowest point in more than three decades.

3. Don't expect the Fed to change course based on one month's data.

Remember, the central bank's mandate includes both employment and price stability. It would take a major change in labor market conditions to alter its current policy course. I don’t expect such a change. Moreover, as I argued on Monday, this would constitute a necessary but not sufficient condition. To alter its policies, the Fed would also need evidence that inflation is firmly heading toward, and beyond, its 2 percent target.

Because the jobs report is highly unlikely to contain big surprises, it is highly probable that Fed policy will remain on autopilot for the rest of the year. This means completing the gradual exit from the bond-buying program known as quantitative easing while holding short-term interest rates near zero and evolving its forward policy guidance.

4. Think about the future.

The jobs report will provide clues to longer-term trends that speak to us both as parents and as part of a vibrant and healthy society.

Consider the teenage unemployment rate, which stood at 21 percent in March and has remained worrisomely high for quite a while now. The longer people are unemployed at that juncture in their working careers, the higher the risk that they will become unemployable -- and possibly even part of a lost generation.

Then there is the divergence in unemployment rates among those with different levels of education. In the last report, the rate for those with at least a bachelor's degree stood at 3.4 percent, compared to 9.6 percent for those with less than a high school diploma. This disparity amplifies the self-reinforcing tendencies of inequality in income, wealth and opportunity. We'll all be worse off if we end up living in an excessively unequal society.

Mohamed A. El-Erian is the former CEO and co-CIO of PIMCO. He is chief economic advisor to Allianz, chair of President Obama’s Global Development Council, and author of the NYT/WSJ bestseller “When Markets Collide.” Follow him on twitter,@elerianm.

Photo: Andreas Klinke Johannsen/Flickr, used under a Creative Commons license.

Andrew Klos, MBA, CPPB

Writing: The common thread linking science, government, & business. Digital Expatriot. NIGP member.

10 年

"... it is highly probable that Fed policy will remain on autopilot for the rest of the year." That means the same failed Keynesian policies will continue on indefinitely. The Fed has no more arrows in its quiver and, frankly, hasn't had any ammo for at least the past three years. It's time to start listening to Hayak and the Austrian School: the accumulation of resources in areas where they are not being used efficiently is the biggest drain on the economy. And the biggest chunk of inefficiently used resources? All the capital tied up in the banking mega-conglomerates. The phrase "too big to fail" is too full of malarkey! Instead of enacting Dodd-Frank, Congress should have reversed the repeal of Glass-Steagall.

回复
Mike Lowe

Proven Digital Marketer specializing in hospitality and tourism.

10 年

Mohamed El-Erian, thank you for pointing out the U6 number. That's something that I wish more people would talk about. I wonder what your thoughts are on wage growth, or lack thereof.

回复
Kandace Keuler

President at Keuler Insurance Agency Inc

10 年

I think the problem is the work ethic, this needs to be taught in school, and by parents,

回复
Mary Millard M.Ed.

~ International Speaker ~ Sharing my patient story for solutions to ARMs & Sepsis/Patient Advocate/Board member at HSI

10 年

As a member of a Workforce Development Board in central NC I have seen many adults who do not stand a chance because they are long term unemployed and are unwilling to spend time and money on training. Small and mid sized companies here are also unwilling to hire right now due to impacts from the new ACA. Yes, the initial numbers make excellent sound bites and are never truly accurate as it does not count those that have given up. Good analysis.

回复

要查看或添加评论,请登录

社区洞察

其他会员也浏览了