Way Down in the Hole

The big number from today’s labor report is 0.4, the percentage by which unemployment dropped in November. Overall, the economy created 120,000 jobs (compared to 100,000 for the previous month) and the unemployment rate declined to 8.6 percent, a substantial improvement over where the economy was in the previous month. In addition, the employment numbers for September and October were revised upwards by a total of 70,000 jobs, another positive sign.

But that’s the extent of the good news in today’s report. Yes, the unemployment rate has fallen to 8.6 percent, but a substantial portion of that was driven by a shrinking labor force—according to the Bureau of Labor Statistics, the civilian labor participation force (the sum of employed and unemployed workers) declined by 0.2 percentage points to 64 percent. In other words, as people give up on finding work, they leave the labor force and place downward pressure on the unemployment measure, despite the fact that they’re still unemployed.

If there’s anything particularly disappointing about today’s report, it’s the extent to which job growth is still below target. At the very least, the economy needs 150,000 jobs per month to keep up with population growth, and even more to make a meaningful dent in the unemployment rate. With private-sector job growth of 140,000, November could have been the month when we reached that point, or at least came close to it. But mass public-sector layoffs—20,000 in this case—continue to drag down economic growth.

There’s no doubt that conservatives will lambast the Obama administration for this report—it’s the job of the opposition, after all—but this is the recovery they say they want. The Republican pitch on the economy boils down to this: If you cut spending, fire bureaucrats, and otherwise get government out of the way, you’ll unleash the power of the private sector and set the economy on the path to recovery. “On my first day in office I will send five bills to Congress and issue five executive orders that will get government out of the way and restore America to the path of robust economic growth that we need to create jobs,” said former Massachusetts governor Mitt Romney when he unveiled his jobs plan in September.

Well, in addition to the spending cuts passed by House Republicans (and signed by President Obama), public-sector employment has declined by nearly 500,000 jobs since the beginning of 2010. Somehow, the magic hasn’t happened yet.

Comments

No magic. War or Deflation resolves universal bankruptcy, not games with the currency.

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