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Policy: Labor

Is the 'recovery summer' for real this time?

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Jobs,Labor,Treasury,PennAve,Joseph Lawler,Economy,Federal Reserve,Unemployment,Jason Furman,Timothy Geithner

It was nearly four years ago, in August 2010, that Treasury Secretary Timothy Geithner published a New York Times op-ed titled "Welcome to the Recovery."

Following the Obama administration's decision to call that summer the "Recovery Summer," the headline on Geithner's otherwise carefully hedged piece proved infamous when the next three jobs reports showed significant losses.

Not only was the summer not a recovery, but there would be no adequate recovery for almost four years — instead, just weak growth in both jobs and output.

Now, however, there are finally signs that the long-awaited recovery, complete with above-trend economic growth, may finally be underway.

The U.S. added 288,000 payroll jobs in June, the Bureau of Labor Statistics reported last week. As a result, the first half of 2014 was the "largest first-half-year for job growth since the late 1990s," noted by White House economic adviser Jason Furman in a Washington Post op-ed.

Furman was cautious to avoid projecting any of the optimism that Geithner did. But the case for faster growth looks as strong now as it has at any point since the financial crisis, as long as one massive contrary indicator — the fact that the economy shrunk at a 3 percent clip in the first quarter — is ignored.

The U.S. has averaged more than 270,000 job gains for the past three months, well over the roughly 180,000-190,000 pace that prevailed since 2010.

The unemployment rate is down more than a full percentage point since last fall, and over the same period, the labor force participation rate has stabilized at 62.8 percent, following years of decline.

The improvement in the labor market has come against the backdrop of rising inflation, with prices rising in all the major indices and by 2.1 percent — above the Fed's 2 percent target — in the headline consumer price index. Those data points, with private-sector economists' expectations that growth will pick up in the second half of the year, suggest that the long-awaited cyclical recovery is at hand.

Of course, economic projections are difficult, and government officials in particular have overestimated the current recovery at every step of the way.

And one ingredient that remains missing from a stronger recovery is faster hiring.

There are fewer layoffs now than there have been in more than a decade, but businesses still are not accelerating their hiring at the pace needed to sustain strong net job creation.

The Job Openings and Labor Turnover Survey that the BLS will release on Tuesday for May could provide the first hint that hiring has in fact picked up, and that the strong payroll job growth reported last week is for real.

For April, JOLTS showed a 7 percent spike in job openings, but hiring was flat. Although millions of Americans are out of jobs and employers increasingly report that they can't find the workers they need, the labor market has yet to start churning at the pace it used to.

It would be a highly positive sign if hiring were to begin growing at the same pace as new positions are created.

Otherwise, however, there will be little data this week to illuminate whether the recovery is real or another illusion.

One other event on the calendar worth noting: On Thursday, Stanley Fischer will give his first public speech as vice chairman of the Federal Reserve. He is slated to talk about financial reform in Cambridge, Mass.

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