Peter Morici

The economy created 288,000 jobs in April, up from 203,000 in March. That’s the second best showing of the Obama recovery but still less than what is needed each month to raise employment to prerecession levels.

Those results are consistent with an economy recovering from its winter slump but performing well below full potential—4 to 5 percent GDP growth and 400,000 to 500,000 jobs a month.

Construction, manufacturing, retail and wholesale trade, business and professional services, finance, health care, leisure and hospitality, and government employment were all up. Information technology registered a small loss.

Hourly earnings made no gain, indicating the economy is still creating too many low paying jobs.

Autos and broader retail sales have been improving; however, the housing sector is yet to take off. An odd combination of constrained demand, caused by higher mortgage interest rates and heavy college debt among young buyers, and short supplies of skilled trades, such as framers and carpenters, in some markets are dampening a much anticipated takeoff in residential construction.

The energy boom has absorbed a lot of the skilled construction labor, leaving residential builders, which traditionally pays less than commercial developers, scrambling in some markets.

Global growth is rebalancing from Asia to the Atlantic community, as Europe begins a slow recovery and growth slows a bit in China and Japan. Much of China’s miracle has been premised on financial gimmicks—an undervalued currency and overly generous credit. As Japan demonstrated in the 1980s, those tactics have limits.

Unfortunately, the effects of currency manipulation on the U.S. economy—along with self- imposed restraints on oil and gas development and the manifest inefficiencies imposed by dysfunctional management and profiteering in health care, higher education and finance—have lowered U.S. annual growth to 1.7 percent since the turn of the century from the 3.4 percent pace accomplished during the Reagan-Clinton era.

Consequently, jobs creation lags population growth. The unemployment rate, which fell to 6.3 percent in April from 6.7 percent the prior month, wholly masks the extent of the problem. The percentage of adults seeking employment dropped precipitously. One out of six men between the ages of 25 and 54 are without jobs, and many have given up looking for work and are not counted in the jobless rate.

Factoring in adults on the sidelines who say they would seek employment if conditions were better and part-timers desiring full-time work, the jobless rate becomes 12.3 percent.

Peter Morici

Professor Peter Morici is a recognized expert on economic policy and international economics. He has lectured and offered executive programs at more than 100 institutions including Columbia University, the Harvard Business School and Oxford University.