Puzder: What recovery? How long can the pretense of recovery act as a substitute for real recovery? The pace of job creation in the U.S. over the past four years has, at the very least, tested the limits of pretense. On Friday, the Bureau of Labor Satistics (BLS) reported that the economy added 157,000 new jobs. This is on top of upward revisions to November and December payroll data, which resulted in an addition of 127,000 new jobs over those two months. Yet, the unemployment rate still ticked up slightly to 7.9 percent. One of the reasons for this seeming disparity is that the BLS uses different surveys for reporting new jobs and calculating the unemployment rate. What the BLS calls the “Establishment Survey” showed that the economy created 157,000 payroll jobs in January. However, in calculating the unemployment rate the BLS uses the more volatile “Household Survey,” which showed that the number of unemployed actually outstripped the rise in the number of employed people. The unemployment rate has dropped over two points from a high of 10.0 percent, reached in October 2009. But that figure is misleading because the government does not count people as unemployed if they have become so discouraged that they quit looking for a job. Much of the drop in the official unemployment rate since its peak is due to this aspect of the reporting protocol. In other words, the unemployment rate has declined mostly because millions of people have dropped out of the labor force. In fact, if no one in the United States was either working or looking for work, our government would report that the unemployment rate was zero. Media coverage of the January numbers was mostly upbeat; the message was that the economy is moving in the right direction. But an in-depth look at the data reveals a jobs environment that is, at best, very fragile. Easy to overstate jobs improvement A closer look at the Establishment Survey, for example, shows payroll employment bottomed out in February 2010, after reaching a peak in January 2008. During this 25-month period, the economy shed over 8.8 million jobs. That represents an average job loss of about 349,400 jobs a month. From November 2008 to April 2009, the economy shed, on average, an astounding 750,500 jobs per month—over three-quarters of a million—for a total of 4.5 million lost jobs in a six-month period. Job loss peaked in March 2009, when U.S. companies slashed 830,000 jobs from payroll. Overall, from January 2008 to February 2010, the U.S. lost 6.0 percent of the payroll jobs that it had at its peak. VIDEO: CKE Restaurants CEO says we need less government It is hard to understate the magnitude of these losses. But, it is also easy to overstate the subsequent improvement. Since the February 2010 trough, the economy has only managed to gain, on average, 157,300 jobs a month—less than half the average number of jobs lost during the recession. The best year for average monthly job growth was 2012, with an average increase of 180,800 jobs a month. These numbers are dwarfed by the magnitude of the losses sustained from 2008 to 2010. As of January 2013, the country is 35 months from the employment trough, but is still 3.2 million jobs short of its pre-recession high. Consider, too, the increase in labor-eligible population But in calculating how far away the U.S. is from a real jobs recovery, population growth has to be considered. Rather than remaining stagnant, the labor-eligible population of the U.S. has continued to increase. On average, about 119,000 jobs are needed per month to keep up with population growth. Thus, of the 5.5 million jobs added since February 2010, over 75 percent has simply gone to absorbing population growth. Only about 1.3 million payroll jobs have gone to the large pool of unemployed. America is still in the hole the Great Recession created, and it is not even just 3.2 million jobs in the hole; it is about 7.4 million jobs in the hole. Consider 2012, the best year so far for payroll job growth. Over the year, the economy added a little less than 2.2 million jobs. However, of those jobs, over 1.4 million simply absorbed new entrants into the labor force. Thus, it took eight months of job creation just to offset population growth. Only four months were dedicated to creating “surplus jobs”—that is, jobs above the number necessary to absorb new workers. At that rate, it would take about 10 years for the nation to close the current jobs deficit. A weak and precarious recovery However, the chance that the country goes a decade without another recession is slim at best. Consider the contraction in real GDP last quarter. While commentators may attempt to find the silver lining in a report that showed a decline in real GDP, the reality is that output stagnated in the fourth quarter of 2012. Whatever the media may call “good” in terms of economic data cannot avoid the reality that this is a weak and precarious recovery. The good news is that the slack in the U.S. labor markets is solvable, although not by more quantitative easing or more government fiscal “stimulus.” Rather, a public policy that promotes positive market certainty, both in the regulatory and fiscal sphere, and pro-growth tax reform is the solution. It means lowering, not raising, marginal rates and capital gains and dividend taxes. It means putting an end to simply kicking the debt can down the road. It means dealing with the grossly inefficient expansion of the government regulatory bureaucracy created by Dodd-Frank and Obamacare. Now is not the time for the Senate to refuse to pass a budget, nor for President Obama to allow his Jobs Ccouncil to dissolve. The U.S. can do better, and can avoid the “new normal” of slow job growth and stalled economic growth; but it is going to take leadership and a recognition that free markets, not government, create prosperity.