On Thursday we learned that the U.S. economy added 288,000 jobs in June, concluding the largest first-half-year for job growth since the late 1990s. Meanwhile, the unemployment rate has fallen by nearly 4 percentage points from its peak of 10 percent in October 2009, with the pace of decline doubling in the past year to the fastest drop in nearly three decades.
Even with this good news, it is essential to dig into the numbers to understand what they mean both for families still struggling to make ends meet and for the work we still need to do to create more jobs at higher wages. We have further to go — especially given a long-term unemployment rate that is still too high and wages that have been stagnant for decades — but our challenges should not distract us from understanding the progress we have made.
Skeptics point to the higher unemployment indicated by a broader gauge of unemployment and underemployment that includes people involuntarily working part time and those who have not looked for a job recently but who still want to work. But this criticism ignores that this measure is always higher than the official unemployment rate and that it has also come down steadily, falling by more than 5 percentage points from its peak in early 2010.
Another claim is that the only reason unemployment has fallen is because people are dropping out of the workforce, what economists call a decline in the participation rate. In fact, since October the participation rate has been stable, so the 1.1-percentage-point decline in unemployment since then stems entirely from more people finding jobs.
It is true that the participation rate has fallen over the course of the recession and recovery. But it is important to put that fact in context. According to a range of studies, including our own analysis at the Council of Economic Advisers, about half of the decline is due to the beginning of a retirement boom as the first baby boomers turned 62 and became eligible for Social Security benefits in 2008. This fully anticipated economic event will continue to put downward pressure on the participation rate for decades.
Correctly diagnosing the challenges we face points us to what we can do to spur more job creation, raise wages and bring more people into the labor market.
First, Congress should take steps to invest in infrastructure, extend unemployment insurance benefits and reauthorize the Export-Import Bank. In the absence of action from Congress, President Barack Obama will press forward by using his executive authority to expand credit in mortgage markets, speed the permitting of infrastructure projects, launch new hubs of manufacturing innovation and attract foreign investment.
Second, a stronger economy will help raise wages, and, conversely, higher wages will help strengthen the economy. That is why it is essential to raise the minimum wage. While Congress has waited to act, many states and businesses are moving ahead. At the same time, investments in everything from preschool to college will raise longer-term wage growth.
Third, although the aging of the population will continue to slow labor-force growth, a range of measures could help offset this trend. For example, immigration reform could expand the working-age population and raise the labor force participation rate.
Finally, the unemployment rates for some groups, such as young men of color, have been a long-standing challenge that was compounded by the recession. That is why we should expand the Earned Income Tax Credit for workers without children and noncustodial parents and why the president has launched an initiative called My Brother’s Keeper designed to help young men of color succeed academically, at work and in their communities.
In June, the United States enjoyed its 52nd consecutive month of private-sector job growth, the longest such streak in U.S. history. That serves as evidence that our current policies have helped sustain job growth — but it also stands as a challenge to do more.
Jason Furman is the chairman of the White House Council of Economic Advisers.