Not Good Enough

7 January 2011



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US Created 103,000 Jobs in December, Unemployment Drops to 9.4%

The Non-Farm Payroll number for December came out about an hour ago, and while it looks pretty good given where America has been, it isn't good enough for where America wants to go. In December, the US created 103,000 new jobs. However, economists expected around 175,000 new positions, and they routinely remind reporters that it takes about 300,000 to keep up with the growth of the workforce. At the same time, the unemployment rate hit its lowest rate since May 2009 at 9.4%, largely due to people dropping out of the workforce. That isn't the best reason possible for a declining unemployment rate.

The private sector created 113,000 jobs (which conservatives consider to be the only real jobs in the world). Government shed 10,000 to give the 103,000 headline figure. Retail jobs rose by 12,000, temporary hiring climbed by 15,900, hospitality and leisure added 47,000 while health care produced 36,000 new jobs. Manufacturing added 10,000 new jobs, while construction lost 16,000 in December. The average work week held steady at 34.3 hours, while the average hourly wage rose 3 cents.

From these figures, one can make a few bold statements. First, the US consumer is back in the mall spending. This Christmas was the best for retailers in years, and this is shown not only by the extra jobs, but also by the increased sales and profits. Because the US consumer accounts for about 2/3 of all US economic activity, this is good news. The bogeyman in the cellar is whether such reliance on consumer spending is a structural positive for the US or whether in the long run it undermines the economy as a whole. If funded by credit, it is bad; if funded by rising incomes, it is good.

Construction is another big driver of the US economy, and the job losses here are disheartening. The housing sector continues to be weak, and commercial real estate is hardly booming either. These have the effect of slowing the recovery, and until they turn around, the best one can hope for is tepid expansion. Manufacturing does offset this to a degree as the same segment of the labor force tends to work in both areas, but manufacturing is not completely offsetting construction weakness.

The bright spots of hospitality and healthcare denote that America's near-term economic future continues to be service based. Hospitality requires very little in the way of special training (although it does demand some). Healthcare is another issue entirely. The nation is still short of qualified care-givers, nurses and physicians. These cannot be created overnight, and importing talent from elsewhere is going to be the short- and medium-term solution. If America doesn't sort out its educational and student financing systems, it may become the long-term answer as well.

The Labor Department also revised the figures for October and November upward, to 210,000 and 71,000 respectively, adding a combined 70,000 jobs to the 2010 total. December's number is likely to be revised as well, but which direction is hard to say at the moment. In any case, getting back the 8.5 million jobs lost in the Bush Macro-Recession is going to take some time at this rate.

The unemployment rate, which reflects people leaving the workforce as well as finding employment, is economically insignificant but politically, it carries a great deal of weight. The socially significant number is the number of the long-term unemployed. Being out of work a few weeks is tough, but when it turns into months, social damage can follow. The Labor Department says, "Long-term unemployment also remained steady, with 6.4 million job-seekers out of work for more than 27 weeks.  The long-term unemployed account for 44.3% of unemployment claims." When that number starts falling, a real recovery will be underway.

© Copyright 2011 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Ubuntu Linux.

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