I don’t really know whether to characterize the initial estimate that the economy added 163,000 new jobs in July as a victory or a catastrophe. It’s a victory in the sense that if you accept the premise that the economy was in good shape at the beginning of the month, this is a perfectly respectable place to have ended it. Given the size and general growth rate of the American population, something in the 150,000-jobs-a-month range is about what you’d expect from a health economy and indeed “since the beginning of this year, employment growth has averaged 151,000 per month, about the same as the average monthly gain of 153,000 in 2011.”
So all’s well.
Except it isn’t well. We didn’t start July with a healthy labor market, we didn’t start 2012 with a healthy labor market, and we didn’t start 2011 with a healthy labor market. To re-obtain full employment, we’d want to be adding jobs twice as fast as this. But 18 months’ worth of steady-state employment gains is much too long a run to just be a coincidence. What we’re getting is roughly the recovery the Federal Reserve wants: a recovery that’s consistent with a 2 percent inflation ceiling and thus isn’t consistent with the kind of wild boom that would put us back on track to full employment. We’re growing modestly as if we were already there. But we aren’t.