Term Sheet

The latest on private equity, M&A, deals and movements — from Wall Street to Silicon Valley

Face it, the job market is recovering

March 9, 2012: 2:48 PM ET

jobs

The signs that the job market is not as good as it seems are fading.

FORTUNE -- It's time to stop the yeah, buts.

Ever since the unemployment rate began falling two and a half years ago, commentators have come up with reasons why the job market is not actually improving. The Labor Department reported that the job market had improved in February, with employers adding 227,000 workers to their payrolls. But that probably won't stop the nay-sayers. Yeah, but what about the shrinking labor force. Yeah, but what about the number of people who can't find full-time jobs. The most recent go-to: The lovely weather.

While is true that the economic and job recovery has been frustratingly slow. It's not true it hasn't indeed arrived. Here's a list of the most common reasons people give as to why the job market it not improving and why they're wrong:

  • The real unemployment rate: Lots of people like to disparage the unemployment rate. Instead, they say the "real unemployment rate" is something economists call the U-6. Unlike the regular unemployment rate, the U-6 also captures part-time workers who would like to work full-time, as well as those who want a job but have stopped looking in the past year. While the regular unemployment rate peaked at 10%, the U-6 got as high as 17.2%. But the fastest rising portion of the U-6 during the recession was in frustrated part-time workers. There were nearly 9 million of those people at the height of the recession from a low of 3.9 million in 2006. The number of people in the count who stopped looking for work peaked at 2.7 million. That would suggest that the economy and job market are more resilient than it appears, not less. At least many people were able to find some form of work. What's more, in February, the so-called full unemployment rate dropped, to 14.9% from 15.1%, while the regular jobless rate didn't budge. The reason, again, had to do with part-time workers, 1.1 million of which found full-time gigs. Does that mean the economy is actually better than it appears?
  • The shrinking labor force: The biggest sign of the weakness in the job market is the number of people who have stopped looking for work. The labor force has indeed dropped since the beginning of the recession, but that may not be as bad as it appears. My colleague Nin-Hai Tseng has a good piece today explaining why a good portion of that drop could be from baby boomers retiring, not discouraged workers. What's more, the drop in the labor force has been slowing recently, and actually reversed in February.
  • Temporary Employment: Yes, people landed jobs, but were they good ones? Just over 40,000, or nearly 20%, of all workers that companies added to their payrolls in February were temporary hires. That might suggest that many companies are reluctant to making actual hires. Temps, however, are hardly taking over the workforce. In fact, as a percentage of the overall workforce, temps only make up 1.9%, which is what it was before the recession began. What's more, a jump in temp workers is a leading indicator of more hiring, as temp jobs often turn in to full-time ones.
  • Weather: Recently, more and more economists have been saying that a relatively balmy winter in much of the country has made the economy look better than it really is. What may be true is that the weather is not as much as a drag on the economy as it usually is. Each month, the Labor Department makes an estimate of how many people were not able to get to their job because of the weather. In February, that number was 178,000. That's down from an average of 300,000 over the past two decades. But it doesn't appear that weather alone was a big driver of job growth. Construction jobs, for instance, which you would expect would benefit substantially from good weather, actually dropped in February by 14,000. So there.
Join the Conversation
About This Author
Stephen Gandel
Stephen Gandel

Stephen Gandel has covered Wall Street and investing for over 15 years. He joins Fortune from sister publication TIME, where he was a senior business writer and lead blogger for The Curious Capitalist. He has also held positions at Money and Crain's New York Business. Stephen is a four-time winner of the Henry R. Luce Award. His work has also been recognized by the National Association of Real Estate Editors, the New York State Society of CPA and the Association of Area Business Publications. He is a graduate of Washington University, and lives in Brooklyn with his wife and two children.

Email | @stephengandel | RSS
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.