Most of the narrative surrounding the latest jobs report has been that the number was mildly disappointing, but nothing extraordinary. That may be right, but it’s missing the point—there is something extraordinary here: we are still seeing such anemic job growth despite GDP growth that is expected to improve, excess corporate cash and a significant need for corporations to invest.
The March employment number reflects the usual rate of hiring during expansionary periods for the past 25 years, of about 200,000 jobs a month. But this number doesn’t account for population growth, strongly suggesting that job growth is far below where it should be.
There are two distinct but closely related problems. First, the benefits of Fed policy have reached their limits. Although quantitative easing is riding into the sunset, it overstayed its welcome and has distorted asset prices and capital allocation decisions profoundly. Companies may be sitting on a lot of cash, but due to uncertainty over organic economic growth levels and aggregate demand, they are wary of using it to make more permanent investments in growth.
Second, there are structural—not cyclical—obstacles to higher employment. The economy is growing in a way that clearly doesn’t require the same number of jobs as in the past. Technology, innovation, job skills mismatches and demographic trends continue to weigh on job growth.