A stronger-than-expected April rebound in job creation and recent dramatic discoveries of vast U.S. oil and gas reserves are helping to lift the American economy out of its long funk.
The good economic news is also drawing attention to the importance of private-sector innovation, rather than government policy, in fostering growth.
The Labor Department’s report that payrolls expanded by 165,000 jobs last month and the unemployment rate declined to a four-year low of 7.5 percent does not represent explosive job growth by any measure.
Yet the report offered a big sigh of relief to President Barack Obama and his Democratic allies in Congress.
It also may help blunt Republican criticism of Obama’s policies and make it easier for him to give more attention to other issues on his agenda, including immigration, gun control and global warming.
At the same time, it provided the GOP with more support for their call for a smaller government and fewer regulations on business.
The recent jobs improvements were mostly driven by private-sector gains independent of action by the president and Congress.
Most legislative fiscal stimulus programs, begun in 2008 under President George W. Bush and expanded under Obama, have run their course. The Federal Reserve, however, continues to stimulate the economy by holding down interest rates and effectively printing money to buy government and mortgage-related bonds.
In fact, the report showed employer confidence about the economic outlook even in the face of new federal budget cuts. Economists widely agree that job gains would have been bigger were it not for the automatic across-the-board cuts that are beginning to take an $85 billion bite out of government spending.
House Speaker John Boehner, R-Ohio, said that while the report had “some good news” on the jobs front, it was still important to “focus on growing our economy rather than growing more government.” He said that includes “expanding our energy production.”
The energy sector plays a major role in global economic growth and recovery.
Recent discoveries have put the United States on track to becoming the world’s largest producer of oil and natural gas in a few years. At the same time, oil imports have fallen to a 17-year low.
The energy breakthroughs have come despite Obama’s heavy emphasis on promoting renewable clean-energy sources, such as wind and solar power, for the future.
In the months and years ahead, domestic energy production “is going to be a real driver of economic growth,” said economist Douglas Holtz-Eakin, a former director of the Congressional Budget Office and chief economic adviser to Sen. John McCain’s 2008 presidential campaign.
These energy gains, while not that big yet, will be reflected in more jobs at drilling and other energy work sites, reduced manufacturing costs and improvements in the nation’s balance of trade, said Holtz-Eakin, now head of the American Action Forum, a conservative public policy institute.
“There’s a lot of things in this jobs report one could like. But it’s also something that leaves you with a long way to go.”
It’s hard to appreciate when you’re in the grips of one, but recessions always come to an end. Recoveries always eventually follow, obeying the physics of business cycles.
But this recovery has been agonizingly shallow, given that the recession officially ended way back in mid-2009. At 7.5 percent, the jobless rate hovers well above pre-recession levels.
Even at the improved pace of job creation over the past six months, it would still take until early 2018 to get back to the more normal unemployment rate of 5 percent or less that prevailed before the recession began in late 2007, said economist Heidi Shierholz of the labor-oriented Economic Policy Institute.
“This is one of those reports that is totally context-driven. In good times, the 165,000 new jobs would be fine, but nothing to write home about,” she said.
“It’s not bad. But we should have added over 6 million jobs since December 2007. Instead, we’re down 2.6 million jobs,” she said. “There’s a big disconnect between people who are just happy that job growth was better than their expectations, and what the report really says about where the labor market is.”
Even so, stocks soared on cue, with the Dow industrials on Friday briefly rising above 15,000 for the first time, before falling back a bit to close at 14,974, still a record close.
The jobs report also reflected a recovering housing industry. But not all sectors were up. Manufacturing, for instance, was flat.
While most energy-related sectors may be on the rise and new technological developments are “promising,” the benefits to manufacturers will be muted because “U.S. manufacturing has become so much less energy-intensive overall in recent years,” said Alan Tonelson of the U.S. Business and Industry Council, which represents close to 2,000 mainly family-owned manufacturing companies.
Tonelson worries about foreign trade barriers, continued high levels of government spending despite recent cutbacks and the Fed’s continuing efforts to stimulate growth by printing money.
“Debt-led growth never ends well,” he said.
Still, the latest jobs report gave the administration a big dose of good news, even as officials agreed there was still far to go.
“The economy has now added private-sector jobs every month for 38 straight months, and a total of 6.8 million jobs,” said Alan Krueger, chairman of the White House Council of Economic Advisers.
“It is critical that we remain focused on pursuing policies to speed job-creation and expand the middle class, as we continue to dig our way out.”