By Thomas A. Kochan
Editor’s note: The U.S. economy added a disappointing 38,000 jobs last month, the smallest number in more than five years, according to seasonally adjusted figures from the Bureau of Labor Statistics. The weak numbers suggest a June interest rate hike – which the Federal Reserve had recently hinted is possible – is now off the table. We asked two of our experts to give us their quick takes on the report.
First published online in The Conversation
We need a clear and credible plan for expanding the economy. It is the uncertainty over the future policies of the next president and Congress that may be the root cause for concern.
The seemingly good news of the headline that the official unemployment rate declined from 5 percent to 4.7 percent evaporated as soon as we read further to see that the reduction came mostly from a 0.2 percent decline in the labor force participation rate and an increase of 468,000 in those working part-time jobs but looking for full-time work.
The news got worse when we read that the economy produced a meager 38,000 new jobs in May and 59,000 jobs were subtracted from the prior two months' figures. From March to May, the economy averaged only 116,000 new jobs per month. If the economy can’t do better than this, it will be early 2019 before we finally reach closure on the effects of the Great Recession by getting back the number of jobs lost plus the number needed to absorb the new entrants to the labor force.
Why do I think uncertainty over the future is a root cause of the problem? Consumer confidence also declined in May. That Conference Board survey found the number of people worried that jobs are hard to find also increased. A University of Michigan Consumer Confidence survey also showed a slight decline, and its authors noted the biggest source of concern is uncertainty over the economic policies the next president will follow.
Taken together, these data suggest two actions: one a stop-gap available to the Federal Reserve and the other one only the voters can take. The Fed should hold the course by not raising interest rates in June and hold steady as long as these dismal numbers and uncertainty over the future persist. Voters should hold presidential and congressional candidates' feet to the fire by judging them against the credibility of their plans for creating and sustaining good jobs with good wages.
Nothing short of that will overcome the uncertainty and lack of confidence that is holding back the economy from reaching its full potential.