Jobs Market Doesn't Show 'Vital Signs' of Lasting Strength

Monday, 13 Jan 2014 09:47 AM

By Peter Morici

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The jobs market is not shifting into high gear, as some analysts have suggested, and the disappointing December jobs report, standing alone, means nothing.

The labor market continues to move along much as it has for the past two years. Hiring is too slow to really dent unemployment.

The December jobs gain (74,000) was poor, but the October and November gains (200,000 and 241,000) were strong. Taken together, the three average 172,000, below the annual averages for both 2012 and 2013, which were 180,000 and 188,000, respectively.

The unemployment rate fell to 6.7 percent in December, largely because the percentage of adults seeking employment — the adult-participation rate — is at historically low levels.

Anemic adult participation cannot be explained by an aging labor force, especially with so many seniors working part time to supplement disappointing returns on CDs and other retirement investments over the last decade. Were the participation rate the same today as when President Barack Obama took office, unemployment would be about 10.8 percent.

Statements from some economists that the jobs market is improving or “shifting into high gear” do curry favor with the White House and its supporters in the media, but those are not substantiated by the data or sound economic analysis.

Low December jobs creation was an outlier, as the White House and some analysts assert, but over and over again good months for jobs creation have been followed by disappointing months.

The hard reality is that monthly economic statistics are highly volatile — regardless of what variable we are measuring — and no significant upward trend in jobs creation yet can be discerned.

A stronger job market could emerge in 2014, but so far the vital signs — as measured by the actual jobs-creation and the adult-participation rate — are simply not there.

Most troubling is that Obama’s jobs performance is roughly the same as the George W. Bush recovery, but still not adequate to provide the job opportunities needed to employ all the young people leaving school and older folks displaced by global competition and improvements in productivity.

To accomplish that over three years would require about 365,000 jobs each month and GDP growth in the range of 4 percent to 5 percent.

The pace of GDP growth during the Obama and Bush recoveries has been about the same — 2.3 percent. The Reagan recovery accomplished 4.9 percent during the period comparable to the current recovery with radically different approaches than either the Obama or Bush presidency.

The nation is in a jobs crisis because the structural problems that give rise to slow growth, chronic unemployment, income inequality and poverty were not addressed by Bush. And those have not been addressed — and are sometimes exacerbated — by Obama.

Important among those are inefficient and dysfunctional government regulation of business, prohibitions on domestic petroleum development off the Atlantic, Pacific and Eastern Gulf Coasts and protectionist policies in China and elsewhere in Asia that limit market opportunities for competitive U.S. products.

Palliative measures, such as support for a higher minimum wage, extending food stamps and Medicaid to more families and emergency unemployment benefits treat the symptoms, but not the causes of an underperforming economy. The taxes necessary to finance those actually drive investment offshore, slow growth and make the underlying structural problems worse.

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