Another Stagnant Jobs Report
The monthly unemployment report doesn’t have quite the political meaning it did during the election, but that can’t hide the truth that it continues to show an economy that is, at best, struggling:
American employers added 155,000 jobs in December, about apace with job growth over the last year, the Labor Department reported on Friday.
The biggest gains were in health care, food services, construction and manufacturing, and the government sector showed modest job losses, the report said. The unemployment rate was 7.8 percent, the same as in November, whose rate was revised up from 7.7 percent.
“It’s not a home-run report by any stretch, but it’s constructive,” said John Ryding, chief economist at RDQ Economics. “It’s another month of fairly stable, solid, moderate job creation.”
Over the course of 2012, the country added 1.8 million net jobs, despite continued job losses in the government sector and anxiety and uncertainty related to a looming fiscal tightening.
Economists are unsure of what the rest of the year holds for the American job market, but most are forecasting more of the same: hiring fast enough to stay just ahead of population growth, but still too slow to make a sizable dent in the 12.2-million-person backlog of unemployed workers.
A number of encouraging trends in the economy suggest that businesses have good reason to speed up hiring, including the housing recovery, looser credit for small businesses, a rebound in China and pent-up demand for new autos. Friday’s jobs report also showed slightly faster wage growth and longer working hours in December, both of which bode well for hiring.
But Congress’s last-minute deal to raise taxes earlier this week will offset some of these sources of growth, since higher taxes trim how much money consumers have available to spend each week.
“Job creation might firm a little bit, but it’s still looking nothing like the typical recovery year we’ve had in deep recessions in the past,” Mr. Ryding said. “There’s nothing in the deal to do that and nothing in this latest jobs report to suggest that. We’re a long way short of the 300,000 job growth that we need.”
The BLS has the details:
The number of unemployed persons, at 12.2 million, was little changed in December. The unemployment rate held at 7.8 percent and has been at or near that level since September. (See table A-1.)
Among the major worker groups, the unemployment rates for adult women (7.3 percent) and blacks (14.0 percent) edged up in December, while the rates for adult men (7.2 percent), teenagers (23.5 percent), whites (6.9 percent), and Hispanics (9.6 percent) showed little or no change. The jobless rate for Asians was 6.6 percent (not seasonally
adjusted), little changed from a year earlier. (See tables A-1, A-2, and A-3.)In December, the number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 4.8 million and accounted for 39.1 percent of the unemployed. (See table A-12.)
The civilian labor force participation rate held at 63.6 percent in December. The employment-population ratio, at 58.6 percent, was essentially unchanged over the month. (See table A-1.)
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers), at 7.9 million, changed little in December. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job. (See table A-8.)
(…)
Total nonfarm payroll employment increased by 155,000 in December. In 2012, employment growth averaged 153,000 per month, the same as the average monthly gain for 2011. In December, employment increased in health care, food services and drinking places, construction, and manufacturing. (See table B-1.)
Health care employment continued to expand in December (+45,000). Job gains occurred in ambulatory health care services (+23,000), in hospitals (+12,000), and in nursing and residential care facilities (+10,000). In 2012, health care employment rose by 338,000.
In December, employment in food services and drinking places rose by 38,000. In 2012, the industry added an average of 24,000 jobs a month, essentially the same as in 2011.
Construction added 30,000 jobs in December, led by employment increases in construction of buildings (+13,000) and in residential specialty trade contractors (+12,000).
In December, manufacturing employment rose by 25,000, with small gains in a number of component industries. In 2012, factory employment increased by 180,000; most of the growth occurred during the first quarter.
Employment in retail trade changed little in December, after increasing by 143,000 over the prior 3 months. Within the industry, employment in clothing and accessories stores fell by 19,000, following gains that totaled 55,000 over the prior 3 months. Elsewhere in retail trade, employment in automobile dealers and in food and
beverage stores continued to trend up in December.Employment in other major industries, including mining and logging, transportation and warehousing, financial activities, professional and businesses services, and government, showed little change over the month.boarnd about the same as 2010. These numbers are far below the levels needed to truly alleviate the unemployment problem that has existed since the start of the Great Recession. Indeed, if we continued to average 153,000 new jobs per month, we would not reach the employment levels we saw before the economy downturn until 2025.
At this point, it’s difficult to know what’s going to prime the jobs engine. At the very least, continued business uncertainty over what the heck Washington is going to do on issues ranging from the debt ceiling to the budget isn’t helping the situation, but there seem to be other issues at play here. Despite the Obama Administration’s promises, health care costs, and most importantly the cost of health care insurance for employers, continue to rise across the board. If that continues to occur, the marginal cost of each new employee rises and it becomes less advantageous for an employer to engage in new hiring than to use their existing work force to meet existing needs. It also appears that many employers are cutting back on full-time employment in favor of part-time labor. Again, motivated in no small part to the requirements of the new health care laws. Unless these and other incentives change, I don’t see employers revving up the jobs engine any time soon.
Are you daft? Name one economy that has grown while shrinking the public sector.
Then you throw out the uncertainty canard?
GMAFB
The BS rhat passes for analysis these days…pathetic.
That’s not going to work for very long…and it certainly won’t result in growth. To make matters worse, firms that have been doing that these past few years may discover they’ve already reached the limit.
I suspect savvy competitors will put this idea in the “diminishing returns” file and will rely on entrepreneurial grit instead.
The part time work thing seems to come from certain industries, things like the franchise fast food business. Only there, the problem is the business model. Not economic policy.
Please rescue my missive from moderation purgatory
Consider the ISM non-manufacturing and employment diffusion indexes.
Our position looks very much like the 2003-2007 recovery.
In other words, structural problems are not merely political problems.
(And we certainly don’t want another 2007-2008 as our “cure.”)
Note that we climbed back from something much worse on that chart, to hit about the same “two year later” levels.
Note also that the ISM non-manufacturing index is in the same band as it was 1998-2000
@C. Clavin:
Doug is a libertarian, so by definition he doesn’t understand modern economic theory, in the same way that creationists don’t understand evolution , and for the same reason: because his ideology depends on him not understanding it.
He tells us that the reason businesses aren’t hiring is not because of a lack of demand (which most economists accept as the reason ), but because of Obamacare (which is a FreedomWorks talking point). He then goes on to blame “uncertainty” (another Freedom Works talking point), which is doubly hilarious because his team ( the conservatives) is the one fomenting the uncertainty with their debt ceiling games.
” Priming the job engine”? Now if there was only some entity that could prime the job engine by borrowing money at zero interest rates and hiring people to build bridges, roads, and otherwise upgrade our infrastructure . Maybe, if Doug thinks outside the FreedomWorks box, he could think of what the entity might be.
John Persona, who does understand modern economics, should weigh in here also, since he says more stimulus is not needed because the recovery is going so well.
All of is, of course, is excellent news for Romney.
@rudderpedals:
Me too, please.
@stonetools:
I did of course compare to 2003-2007, and note structural issues.
The question of structural versus still-cyclical problems is at the center of the stimulus question.
To borrow the meme, One Does Not Simply … Apply Stimulus to Structural Problems.
(But I don’t think Doug really tries on the economics. He just skims for bad news.)
@john personna:
Sorry, John, didn’t see your post.
I think we are a million miles away from the 2008 situation, where there was a huge run up in housing prices that fueled a financial bubble. I don’t see any of that here. If you look especially at the world economy, it looks like a lot more like the 1930s ( except a lot better of course).
The problem is stagnant demand, not a housing bubble.
Oh, on structural things, consider Barry Ritholz’ 20 year retrospective:
NFP: 20 Years of Net Job Creation
There was a lot of real estate and construction done in those 20 years. There is now the possibility that the US is overbuilt … Christina Romer:
Note that housing demand depends on population growth, especially a cohort doing “household creation.”
@john personna:
Could you spell out a bit what you mean by “structural problems?”
Investing in infrastructure, which could be considered stimulus, is addressing a structural problem .
@stonetools:
Again, I compared us to 2003-2007. We do face the risk of bubbles if we stimulate too long, but that isn’t really my main point.
My main point is that our rate of recovery is similar to the past few recessions. I think that is structural.
I think we are past the stage, now, where there are just cyclical shortfalls the government can displace.
@stonetools:
A cyclical downturn would have components like “recession so fewer people buy cars, to get them going you do a cash for clunkers” to hasten return to the norm.
A structural changes would be like manufacturing goes off-shore, or housing reaches a generational change, etc. There you can’t simply stimulate manufacturing again, nor would you want to stimulate another real estate bubble.
In the first case markets want to return to normal, you are just hastening. In the second, the markets are heading the wrong way, and you can’t turn them with simple spending.
@john personna:
We don’t need any more houses and office buildings. We do need to upgrade bridges, dams, railroad track, school buildings, Internet infrastructure….
There are a lot of tasks that need to be done.
Cyclical Unemployment vs. Structural Unemployment at The Big Picture.
@stonetools:
I’m afraid employment and bridge building are two separate things at this point.
Technology makes them have low labor content. Few men, big machines.
@john personna:
There’s something to that, but some construction tasks, like removing lead paint from school buildings or replacing copper wire with fiber optic cable, are more labor intensive.
I think we also need to borrow from the Germans. They had a much more ambitious Cash for Clunkers program , and encouraged job sharing and flextime with tax incentives .
@stonetools:
Sticking to the economic question for a second, from that Big Picture piece:
Many here repeat from Krugman that we face, at least partly, a cyclical fall in aggregate demand. That would call for classical (and counter-cyclical) Keynesian stimulus.
If “the short run is over,” it’s a different question. The government should hire lots of people because it “can?”
@john personna:
I guess I’m a Krugmanite here. Also too, the short run doesn’t have to be “short”. Finance-fuelled recessions are worse and last a lot longer than “regular’ recessions, historically
The Great Depression lasted a hell of a long time, even after we stopped doing the wrong things and started doing the right things. Indeed, one thing that prolonged it was because we stopped doing fiscal stimulus in 1937, because people felt we had done too much stimulus and need to go back to balancing the budget. The result?
.
One of things holding back this recovery is that public sector employment has fallen. Had we kept up PS employment levels, we would be doing a lot better, and there would be less talk of “structural factors”, IMO
I agree it’s the critical question. It’s too bad structural v. cyclical can’t be directly measured somewhere.
I will note that you said above “We don’t need any more houses and office buildings.”
That is a recognition of structural change.
W/R/T construction what should have been a cyclical issue it seems to me is becoming structural. Take the Bakken shale workers living 20 to a Nissen hut in work camps because there are no places to live. When it was easier to move the workers could simply pick up and go where the jobs are. Structural issues (job lock (assuming they have a job….) and debt tied to homes in the overbuilt parts of the country are preventing the movement.
Yes. Malls and office parks everywhere. Subdivisions that no one wants to live in. We need to question the open-end growth model.
Regarding Krugman specifically, if memory serves it’s not his position that there is no structural component. IIRC, he thinks it’s something like 2/3 cyclical and 1/3 structural, but derides those who push “structural” because he thinks they’re using it as a way to avoid doing anything. He may or may not be correct on that.
I think we all know the basic structural story: more machines/fewer people + cheap overseas/immigrant labor. This has helped (along with tax policy) inequality and created jobless recoveries, where businesses just hum along with fewer people. Profits: fine. Employment level: not fine. Ouch.
I don’t know how this is going to shake out. I find myself both agreeing with JP on broad strokes, but also agreeing with those arguing for more public investment with, obviously, borrowed money (renovating/retrofitting buildings to be more energy efficient, lead abatement, etc), given the immediate situation (negative real rates + persistent high unemployment). Basically I think it would help some, but that problems would remain. The trend will remain. Then what? I don’t know.
@rudderpedals:
I think it was kind of the peak when boomers owned both their family homes AND their future retirement homes in parallel.
(Maybe that’s a California thing, but a lot extended themselves with out of state, second home, purchases.)
Part of the aging demographic thing is downsizing, and for continuance, you’d need a cohort wanting to fill the McMansions again.
(Or immigration to fill those homes. Hence the very good but unpopular idea “buy a home, get a visa.”)
@john personna: I wanna rely on Rob from CT’s point that the elements of the problem are some combination of cyclical stuff and structural problems. Obviously there’s a structural problem with an economy that gets so top-heavy in FIRE and financial shenanigans that when the business cycle turns the whole thing capsizes, amplifying the downward swing. I guess my concern was more a micro level concern where those who might have been and still could be insulated from cyclical swings are instead left to their own devices and over time contribute to the structural problem but in a different way, as long term un or under employed, or they lose their health, etc.
What we may have to do is admit that if we want a truly working economy we’re going to have to stop trying to be so goddamn efficient at everything. Push everything onto machines we don’t have to pay salaries to, you have a company manufacturing a lot of product but there’s no demand out where to buy the product because everyone is unemployed.
The other pull-back we’re going to have to do is make sure that for any economic benefit, it’s not only the guy at the top that takes all of it. Spread the increase in wealth around. People running companies have to think not just of their product, but also making sure that the people around them can buy their product. Remember Ford and his “outrageously high” salaries for his workers? He wanted them to be able to afford to purchase the cars his company was making.
We have to stop worrying so much about cutting costs and more about stimulating demand.
The libertarian versus the economist.
Doug’s headline says one thing, and ….
…. well, some people have a different interpretation.