Is the Job Market Really Back to Its 2008 Peak?

Predictions were off. May hiring did not slow as much as forecast and, contrary to expectations, the unemployment rate did not budge from April’s 6.3 percent. The Department of Labor’s Employment Situation Report showed that U.S. employers expanded payrolls by 217,000 jobs last month — a slightly greater gain than the average of 214,000 jobs added per month in 2014. May also marked the fourth consecutive month in which job creation surpassed 200,000, a benchmark for the health of the economy.

Now, “people will start accepting that the labor market is working better than people think it is,” IHS Global Insight chief U.S. economist Doug Handler told The Washington Post. Indeed, the labor market has achieved an important goal; May’s employment gains mean all the jobs lost during the recession have been recaptured, leaving employment at an all time high of 138.4 million people, just above the previous peak of 138.4 million, which came in January 2008. Of course, in the five years of the recovery, the U.S. population has grown, and so the percentage of Americans that are employed remains smaller than before the recession began. According to an analysis conducted by the liberal Economic Policy Institute, more than 7.1 million jobs need to be created to fill that gap. That reality indicates to the think tank’s economist Heidi Shierholz that the United States is “far, far from healthy labor market conditions.”

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Another indication that the job market is far from healthy is the labor force participation rate — the share of working-age Americans who are employed or looking for work. April’s Employment Situation Report revealed that the unemployment rate had fallen from 6.7 percent to 6.3 percent that month. That 0.4 percentage point drop in the unemployment rate came from a sizable decrease in the labor force, meaning workers were still discouraged and unable to find employment. That aspect of the jobs report was by no means surprising; a disheartened labor force and a record low labor force participation rate has characterized the recovery, providing evidence that recovery has not yet reached all Americans.

By comparison, economists expected that increases in worker confidence would push more job seekers into the labor force in May, pushing the unemployment rate up a tenth of percentage point to 6.4 percent. After falling dramatically in April, the size of the American workforce grew marginally. But that small increase was not enough to change the labor force participation rate, which remained unchanged from the previous month’s 62.8 percent. Together, the aging of the baby boomer generation, the discouragement of job seekers, and a lack of new entrants has shrunk the United States workforce to the lowest level since 1978.