The recovery we’ve been hoping for?

By Matt O’Brien / The Washington Post

Long-term jobless finally getting hired

Employers who added 288,000 jobs in June showed they might be taking a more serious look at résumés from the long-term unemployed, who last month accounted for the smallest proportion of U.S. jobless ranks in five years.

Those out of work 27 weeks or longer made up 32.8 percent of jobless Americans as the overall unemployment rate dropped to an almost six-year low of 6.1 percent, according to the jobs report.

“You’ll see more and more businesses start to hire the longer-term unemployed, and that’s going to put some downward pressure on wages as well,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc.

The share of long-term unemployed remains more than twice the historical average of 15.1 percent in data going back to 1948. But about half of the drop in unemployment in the past year is due to the decline among the long-term jobless. Overall unemployed fell by 2.27 million, which included 1.24 million of those out of work for 27 weeks or longer.

That progress includes a drop in the long-term share over the past six months, which matches a stretch in 1993 for the biggest decrease since 1962.

While some of those job seekers are back at the office, others might have contributed to the 676,000 who in June reported being too discouraged to look for employment. That level, while still elevated compared with 20 years in the survey, declined last month to its lowest since December 2008.

Further reductions among the 3.1 million long-term unemployed may in the short term help keep a lid on wage growth, which increased 2 percent in June from a year earlier.

Still, as demand persists, managers in higher-paying industries may find they’ve reached limits of their productivity gains with existing workforces and start adding employees.

— From wire reports

For the first time since early 2000, the economy has added more than 200,000 jobs for five months in a row. And June’s 288,000 net new jobs were enough to push unemployment down to 6.1 percent, its lowest level since September 2008.

By diminished postcrisis expectations, this was about as good as a jobs report gets. Unemployment fell for the good reason that more people were getting work rather than more people were giving up, as the labor force grew by 81,000. Revisions added another 29,000 jobs to the previous two months. And the 2.5 million jobs the economy has added the past 12 months make it the best year of the recovery so far.

According to Labor Department figures released Thursday, the three-month average of job growth — 271,000 now — is almost the best of the recovery, too. The only times it has been better were after the Census hiring temporarily boosted the numbers in 2010, and when the economy briefly looked as if it was achieving escape velocity in early 2012.

But is this time different? In other words, will this latest jobs boom turn out to be just another blip, or will it be the start of a new and faster phase of the recovery?

One reason for optimism: seasonal adjustments. The jobs number you hear isn’t the actual number of jobs the economy has added. It’s the number of jobs the economy has added compared with how many it’s expected to at that point of the year. The idea is that the economy pretty predictably adds more jobs during some times — say, Christmas shopping season — than others, so we need to adjust the raw numbers to get at the economy’s underlying strength.

But the problem is that the financial crisis messed up these seasonal adjustments for a few years. That’s because the worst job losses happened in the winter of 2009, and our seasonal models, which didn’t know about a Lehman Brothers scandal but did know about the calendar, naively assumed it had to be due to the weather. So these models started adding more jobs than usual to the next few winters to make up for what they thought was the new pattern of massive job losses in January and February. That’s why it looked as if job growth was surging every winter and crumbling every summer — because the models were adding more to the former and subtracting more from the latter.

And that’s also why the upswing in January 2012 was so different from the one today. Back then, it was mostly a statistical mirage. But today, these seasonal distortions have faded and the recovery is real — or at least more real. Car sales, for example, just grew at their fastest pace in eight years, and unemployment is falling far faster than policymakers predicted. Just a few weeks ago, the Federal Reserve forecast that unemployment would be 6 to 6.1 percent by the end of the year. It’s 6.1 percent already.

But the big question is whether this will be enough to bring back the shadow unemployed. It hasn’t yet. In June, there were 275,000 more people working part time for economic reasons. And though it sounds like good news that long-term unemployment fell by 293,000, it probably isn’t when you consider that, as economics writer Ben Casselman shows on FiveThirtyEight.com, most of them are giving up rather than finding work. In other words, there’s still plenty of shadow slack, and that probably explains why average hourly earnings have barely kept up with inflation, up 2 percent the past year.

The good news is that gives the Fed plenty of scope to keep rates low and, perhaps, help support a stronger recovery that reaches more people. The better news is that it finally might be starting to already.

Dow above 17,000

The Dow Jones industrial average jumped above 17,000 on Thursday for the first time in its 118-year history, spurred by the jobs report and hopes of a strengthening recovery. In general, the stock market’s rally has taken place even as a tepid economy has failed to lift the incomes of many Americans. Read more on Page C5.