On 7 August the American economy was reported to have lost 23,000 jobs in July. Forecasters had expected 80,000 to be added. Wage growth slowed to 3.2 per cent over the year, which is less than the rate at which prices are rising. And the unemployment rate went down. It went down because people left the labour force, which is the one route out of unemployment that requires no employer to do anything at all.
Heather Long, chief economist at Navy Federal Credit Union, called it “a bleak jobs report.” Breyon Williams of the Groundwork Collaborative was more exact: the figures show “a patchwork economy that is fraying at the seams.” Representative Pramila Jayapal put the political version of it plainly: “Trump is tanking the US economy.” None of it reached the Federal Reserve, which spent the following three weeks preparing the country for higher interest rates.
Leaving unemployment by giving up is the only exit that requires no employer to do anything at all.
Behind the monthly noise sits a stock of people the headline does not describe. Nearly two million Americans have now been out of work for more than half a year — a quarter of everyone the survey counts as unemployed — and some 700,000 stopped searching in June alone. They are not inside the 4.1 per cent. They were once. The share has barely moved in a year, which is another way of saying that nothing is being done about it.
On 28 August the chair of the Federal Reserve told Jackson Hole: “People who want to work, by and large, are holding or finding jobs.” He believed, he said, that the labour market was consistent with full employment. He said it in the same speech in which he explained why rates might have to rise. Read together, the two halves are a policy. The price of oil is not going to fall, so the price of labour will be made to.
Robert Kuttner set out the mechanism in April, when the war was six weeks old and retail petrol was already 21.2 per cent dearer than a year before. Real hourly earnings had fallen 0.6 per cent in March. Consumer sentiment stood at 47.6, the lowest ever recorded. An energy shock imported from a war raises prices that no interest rate can touch, and the central bank answers by raising the price of everything it can touch: credit, then hiring, then you.
The obvious reply is that this is conspiracy dressed as economics, and half of it deserves conceding. The statistics are not fabricated. The surveys are honest, the revisions are published, the long-term unemployment share sits in the release for anyone to read. That is the uncomfortable part. Nobody had to lie. An accurate measurement of a labour market can describe a country where two million people cannot find six months of work, and still be reported as good news.
What is chosen is the response. Unemployment insurance that replaces a real fraction of a real wage is not exotic. Public hiring into work that obviously needs doing is not exotic. What is exotic is the idea, repeated with every monthly release, that a person out of work for twenty-seven weeks has made a series of small personal mistakes. They have not. They have been allocated, by institutions that then describe the result as full employment.
