Unfinished jobs

US jobs gains yet to vanquish crisis hangover

The US job situation is steadily improving - but the financial crisis hangover still isn't cured. The economy added 223,000 more positions in June and the jobless rate fell to 5.3 per cent, the lowest since April 2008. The latter figure, especially, should mean a tightening labour market. Yet, there remain clear signs of slackness, like a new low for workforce participation and stagnant wages.

Last month marked the sixth anniversary of the end of the so-called Great Recession, which brought the US unemployment rate to a nasty peak of 10 percent in 2009. At 5.3 per cent, the headline number is now nearing the rate many economists view as representing sustainable full employment. But the validity of that notion is murky because participation in the workforce has fallen like a rock.

Participation had been stable, if low, since the fall of 2013, hovering around 62.9 per cent. But it dipped to 62.6 per cent last month, hitting a trough not seen since 1977. That could be a blip or related to the retirement of older Americans. Demographic shifts mean participation won't recover fully to pre-crisis levels of around 66 per cent or higher. After all, 7.3 million more people over the age of 65 reside outside the workforce than eight years ago. Even so, the latest decline makes disappointing reading.

Wage growth - which would signal a genuinely tightening jobs market - has also been sluggish. Last month, earnings were just two per cent higher than a year earlier.

Even though the number of unemployed Americans has dropped by 7 million from the 2009 peak, it remains more than 1 million above the tally in June 2007 before the recession began. Similarly, those working part time for economic reasons, though noticeably fewer than six years ago, number about 2 million more than before the 2008 crisis began. Long-term unemployment, although declining, is still high, too.

It's a slightly contradictory picture, including for the Federal Reserve's monetary policy decision-makers who will once again consider raising interest rates later this month, and then in September. The job market is on the mend. But the underlying damage from the 2008 crunch is proving persistent.