Blog : Let the Rest of the World Look On In Envy

by Ed Zwirn on June 6th, 2014

Let the rest of the world look on in envy: About 1,300 people have found jobs in the U.S. each month since January 2008.

This morning's employment situation release by the Bureau of Labor Statistics surprised no one (and the current highly priced stock market is in no mood for surprises) with its news that 217,000 jobs were added to the U.S. economy last month. Although predictions had been all over the place, the consensus averaged out to a gain of 220,000, down from April's 288,000.

May's showing puts the recent jobs situation squarely within trend. Incorporating revisions for March and April, which decreased total nonfarm employment by 6,000 on net, monthly job gains have averaged 234,000 over the past three months, a pickup from the 197,000 average growth seen in the 12 months prior to May.

With the May gains, the U.S. economy has finally seen payroll employment surpass its pre-recession level. Nonfarm payroll employment fell 8.7 million from January 2008 through February 2010. Since then, employment has risen by 8.8 million. This headline had been already priced into expectations, and in fact trumpeted by the financial media in advance, as it would have taken only about a 120,000 job gain for May to cross the line.

And while it does in fact make for good news to say that the economy may have finally emerged from a six-year trough, and jobs growth, at least for the past few months, is maintaining a satisfactory pace, the fact that this breakeven point was so long in coming does much to explain the disconnect between a bull market and a discontented populace.

Around 100,000 people have found jobs, on net, in the U.S. over the past 76 months. During much of this period, many workers were understandably discouraged due to the actual difficulty getting a job when people were getting canned all around them. The rebound since then has been a slow one, but it has been a rebound all the same, but the outlook among many jobs seekers remains as gloomy as ever.

According to the BLS, the number of discouraged workers, who believed that no jobs were available to them, was 697,000 in May, little changed from a year ago. Also, in May, the labor force participation rate was unchanged at 62.8%, after falling 0.4% in April, causing the unemployment rate to hold steady at 6.3%.

Much of April's decline in job-seeking activity is undoubtedly a delayed reaction to the end of emergency unemployment benefits in January. The expiration of these benefits meant that these long-term unemployed no longer had any reason to even keep up the pretense of looking for a job.  As I pointed out in this penny stock blog last month, it seems that these workers kept up their searches for a few months longer than expected before giving up the ghost.

It is tempting to conclude that these discouraged workers will soon pull themselves up by their proverbial bootstraps and return to work, but the problem is more nuanced. For one thing, in the more than six years that it has taken the U.S. employment situation to recover on net from the recession, these workers have become more than six years older.

Full Disclosure: I am 58 years old as I sit down to write this. When it first became apparent to me in 2007 that the economy would begin to tank, I had of course been 51, and still part of the labor force. Recently laid off from a job as editor of a trade publication, it was then that I came to the realization that the downturn to follow the so-called Financial Meltdown would take years to reverse itself, years in which my resume would age and my male-pattern baldness become more pronounced.

In retrospect, my realization that it was already too late for me to continue to cut a rug in the world of official employment has made me one of the many who have exited the ranks of the 62.8% of the able-bodied adult population participating in the labor force. While this epiphany hasn't made me wealthy since then, I count myself more fortunate than most in that I have been able to earn a living while counted among the officially "discouraged."

For most others, this has been a more dire scenario, and it will take many more years (four more years, in my case) before my cohort of discouraged workers ages off the employment situation report and on to the Social Security rolls.

The upshot for penny stock investors: This morning's jobs report hit the sweet spot for the many investors worried that the slow U.S. economic recovery would show either signs of derailment or overheating. It has done neither, and, with the number of employed essentially unchanged from 76 months ago, has a lot farther to go. This potential for growth going forward can only help sustain the returns seen for investors as we continue (hopefully) to claw our way back.