Before We Get Too Excited About the Jobs News…
Jan 6th, 2012•By: Elizabeth Parisian•Category: General•0 comments
The official story on jobs is upbeat -- today's report from the Bureau of Labor Statistics (BLS) points to the creation of 200,000 jobs in the month of December, bringing the official unemployment rate down to 8.5 percent. But before we get too excited, here are three pieces that offer grounds for skepticism and alternative perspectives on the employment situation:
Dean Baker of the Center for Economic and Policy Research (CEPR) calls the recent drop in unemployment a "fluke" and says we "can expect to see rising unemployment in the months ahead":
The number of people involuntarily working part-time fell by 406,000, the third consecutive month of sharp declines. On the other side, the unemployment rate due to job leavers fell by 0.4 percentage points, suggesting workers lack confidence in their job prospects. The unemployment duration measures edged down slightly, but did not completely reverse the jump seen in October. The percentage of workers experiencing long-term hardship, a fuller measure that includes people who have left the labor force, is near 7.0 percent, roughly twice the share of workers experiencing long-term unemployment.
The survey reported 200,000 jobs in December; however, this figure is skewed by the 42,200 job gain reported for couriers. There was a similar gain in this category reported for last December, which was completely reversed the next month. Clearly this is a problem of seasonal adjustment, not an issue of real job growth. Pulling out these jobs, the economy created 158,000 jobs in December, in line with expectations.
Pulling out the courier jobs, growth has averaged 145,000 per month over the last four months. This is somewhat better than the 90,000-100,000 a month needed to keep pace with the growth of the labor force, but certainly not rapid enough to explain a 0.6 percentage point drop in unemployment. At this pace, we would not get back to pre-recession levels of unemployment until 2027.
On the Wall Street Journal's MarketWatch, Christian Weller, a professor of public policy at the University of Massachusetts Boston, argues that the optimism of the jobs report "masks persistent weaknesses" like "high unemployment rates among many population groups, stubbornly high long-term unemployment, and continued public-sector job losses":
The job growth during the last business cycle from March 2001 to December 2007 was the slowest of any business cycle since World War II. Whatever job growth existed was inflated by housing-bubble-related construction employment. And the current cuts in public-sector employment offset the gains in private-sector employment.
With today’s positive news, there is a risk of policy-maker complacency if the numbers are interpreted as a sign that a substantial labor market recovery is underway. ...the persistently slow job growth over the past year meant that millions of out-of-work Americans — disproportionately communities of color, young workers, and workers without a high school degree — could not find a new job.
These persistent and long-running weaknesses require continued policy attention with extended unemployment insurance benefits, support for states and localities to maintain employment in education, health care, and other critical services, and infrastructure investment to buttress the blooming recovery in construction and manufacturing. Millions of Americans will continue to experience enormous economic pain without such policy steps.
Roger Hickey of the Campaign for America's Future says the jobs report "shows that our economy continues to struggle to create jobs" and "we are still not growing fast enough to make significant dents in the unemployment rate (and much of this month’s decline comes from discouraged workers giving up on their job search)":
Today's report of 200,000 jobs created in December means that the economy is barely growing at the rate needed to keep up with the growth of the labor force. Economists estimate that the U.S. will have to create more than 350,000 jobs per month – for the next three years – to get the unemployment rate down to 6 percent. The fact that the unemployment rate has declined to 8.5 percent has got to mean that many more people have become so discouraged that they stopped looking for work (and thus are not counted as part of the labor force).
Clearly, if we don’t want to stay stuck at high levels of unemployment – and the growing inequality that comes with stagnant growth -- our government needs to take stronger steps to create jobs. Instead, Republicans in the Congress are still threatening to remove stimulus from the economy by blocking extension of unemployment benefits and continuation of President Obama’s middle-class tax cuts. Today’s report will add public pressure on Republicans to renew those policies before the two-month temporary extension expires next month.
But we have to do much more than continuing last year’s modest stimulus. Americans need to pressure their representatives to take advantage of record low interest rates to invest in public infrastructure, energy conservation and renewables, and education. These are investments our economy needs to make anyway – and if we make them now, we can create enough jobs to escape today’s way-too-modest levels of growth and move our country to full employment.
