Rising U.S. employment masks lingering malaise

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
By Martin Hutchinson
NEW YORK, Feb 3 (Reuters Breakingviews) - A strong U.S. employment report on Friday masked some lingering malaise. January saw 257,000 new private-sector positions created and the jobless rate falling further to 8.3 percent. That’s good news for job-seekers and Obama fans. But labor force participation is well below 2007 levels and long-term unemployment is way too high.
Job increases last month were broadly spread, making for a justifiably positive reaction in financial markets. Even America’s construction sector added 21,000 jobs. Manufacturing, professional and business services, healthcare and the leisure and hospitality sector all added tens of thousands of jobs each, suggesting a job-creation machine finally beginning to fire on all cylinders.
Productivity data released on Thursday suggest robust job gains may continue. Fourth-quarter 2011 nonfarm labor productivity increased only 0.5 percent from the last three months of 2010. That suggests the jobless recovery of 2009 and 2010, with outsourcing and rapid productivity gains, may have morphed into an expansion that involves more hiring, even if economic growth remains modest.
However, aspects of the data remain disquieting. Labor force participation at only 63.7 percent is the lowest since December 1981 and nearly three percentage points below the 1998-2007 average. And long-term joblessness at 42.9 percent of all the unemployed remains close to its peak, far above the pre-2008 high of 26 percent back in 1983.
This combination suggests that, for many people, jobs are not coming back any time soon. To some extent, this may reflect the exceptional downturn in construction, a sector that could eventually re-employ workers even after a long gap. But for some, the future may hold only long-term unemployment followed by an exit from the official workforce. Even in a booming economy, that could make the traditional definition of full employment hard to attain.