Just a Reminder: The Labor Market Is Still Unhealthy

To wit:

After adding 217,000 net new jobs last month, the U.S. economy has recovered all the positions lost during the Great Recession. But economists warned that the news Friday from the Labor Department was no real reason to celebrate.

“Things are improving, but it’s happening agonizingly slowly,” said Heidi Shierholz, a labor market economist at the Economic Policy Institute.

“At the pace we are currently going, it will take nearly four more years to get back to prerecession labor market conditions.”

Total nonfarm employment in May reached 138.463 million, surpassing the previous high point of 138.365 million in January 2008, the Labor Department said.

The recession, which had just begun then, caused the economy to shed 8.7 million jobs through February 2010. The labor market has been slowly growing since then and the announcement that the workforce had hit a new record was a milestone in the recovery.

But Shierholz noted that the working-age population has grown by 14.5 million people since January 2008. She estimated the economy is still 6.9 million jobs short of where it was at the start of the recession, given that growth. The gap is reflected in the unemployment rate. The Labor Department said Friday that the rate held steady in May at 6.3%, the lowest level since September 2008. But the rate was 5% when the recession began in December 2007, and economists say that’s roughly the full employment level.

And the unemployment rate might overstate the health of the labor market.

Let me state again my belief that those who think we are out of the woods when it comes to the state of the economy are talking through their hats. And in related news, we shouldn’t even be thinking of phasing out bond purchases and monetary stimulus on the part of the Federal Reserve, let alone contemplating raising interest rates.