Unemployment Rate Drops To 8.6% But Job Growth Remains Weak

Some good news in the November jobs report, but not very much of it.

Job growth in November was still stubbornly weak, and far below the numbers we would need to see to get the vast number of unemployed people back to work, but the unemployment rate itself fell to its lowest level  since March 2009:

Job creation remained weak in the U.S. during November, with just 120,000 new positions created, though the unemployment rate slid to 8.6 percent, a government report showed Friday.

The rate fell from the previous month’s 9.0 percent, a move which in part reflected a drop in those looking for jobs. The participation rate dropped to 64 percent, from 64.2 percent in October.

The actual employment level increased by 278,000. The total amount of those without a job fell to 13.3 million.

The measure some refer to as the “real” unemployment rate, which counts discouraged workers, also took a steep fall to 15.6 percent from 16.2 percent, its lowest level since March 2009.

Average earnings were essentially flat, up two cents to $23.18 an hour. Private payrolls increased 140,000, considerably less than a report earlier this week showing that nongovernment jobs were up by more than 200,000 for the month.

Government payrolls fell 20,000, including a 4,000 drop in federal positions.

As expected, the service sector was responsible for the bulk of job creation, adding 126,000 jobs against just 2,000 for manufacturing.

Long-term unemployment remains a big problem: The average duration for joblessness surged to a record-high 40.9 weeks. Stagnation in wages also continues, as more employed workers took on second jobs. There were just under 7 million multiple job-holders for the month, the highest total in 2011 and the most since May 2010.

There were also revisions to the jobs reports for September and October, which made those numbers look just a little better than they seemed initially. September’s initial report of a net 158,000 jobs added was revised substantially upward to 210,000, and October’s 80,000 net jobs added was revised upward to 100,000. Both of these are good numbers, but again, nowhere near the level we would need to see — typically we need at least 150,000 net jobs created per month just to keep up with population growth— for real sustained job growth. Additionally, the drop in the unemployment rate is largely attributable to the fact that some 310,000 people simply stopped looking for work and therefore are no longer counted as unemployment. The Labor Force participation rate fell from 64.2% to 64.0%, if that figure were at the same level it was at the time President Obama took office, the current unemployment rate would be 11%. So, while the press, the Administration, and many Americans are likely to focus on the topline unemployment number, there’s really nothing encouraging about this report beyond the fact that it’s always good when more people are working. Even Matthew Yglesias acknowledged that on Twitter this morning, when he noted that lowering unemployment by decreasing labor force participation is “not exactly winning the future.”

Despite all of these caveats, the political importance of the topline unemployment number dropping shouldn’t be underestimated. Notwithstanding the fact that job growth remains anemic, there’s a psychological difference between saying “9% unemployment” and “8% unemployment,” not a big one to be sure, but a difference nonetheless. Republicans who have been attacking the President over a 9% unemployment rate can’t do that after this number, and the Administration can at least point to the fact that the number is going down, even though the reality behind that drop isn’t necessarily good news. For the people who only pay attention to headlines, this drop will seem like good news.

But it’s not all good news for the Obama Administration. It’s been noted repeatedly that no President has been re-elected since the end of World War II when the unemployment rate was higher than 7.2. Barring a spectacular, unexpected, and unlikely spate of economic growth in the next several months, it’s pretty much impossible that we’ll be anywhere near that level coming November 2012. Instead, it’s more likely we’ll either be right where we are now, or maybe somewhere in the low 8% range. That’s because these figures hint at a double edged sword for the Administration. If the economy is indeed improving and hiring is increasing, then people who have been sitting on the sidelines, and therefore not being counted in the current statistics, are going to start looking for work again. That’s going to cause the labor force participation rate to rise, which is a good thing, but it will also cause the unemployment rate to rise, at least temporarily. So, even if things improve over the next year, the employment statistics are likely to remain pretty depressing, and potentially problematic for the Administration.

So there’s some good news here, but not a whole heck of a lot. The biggest, and most depressing take-away from the report, in fact, is that three times as many people gave up looking for work in November as got new jobs. To say the least, we’re going to need a much stronger economy before the unemployment picture starts looking anything like it was before the recession started.

Update:  Ezra Klein digs into the BLS report and notes that most of the hiring boost came from retail sales, while hiring was negative in other sectors of the economy, including construction and manufacturing. This could mean that we’re looking at temporary holiday jobs that will be gone by January 2012.

FILED UNDER: Economics and Business, US Politics
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010 and contributed a staggering 16,483 posts before his retirement in January 2020.

Comments

  1. Jr says:

    I wonder if part of the reducing workforce has to do with baby boomers retiring. Hiring for young people had it’s biggest spike since the recession began.

  2. Hey Norm says:

    Once again, as it has for over a year, the private sector added enough jobs to at least keep us above water if not move us ahead…but the Libertarian wet-dream of shrinking Government is still holding us back. If Government employment just stayed level we would have been chipping away steadily at the UE numbers for a long time now. The bottom line is that we have the recovery the GOP and Libertarians say they want…and yet we again get the complaint that:

    “…Job growth in November was still stubbornly weak..”

    Where is the tremendous growth promised to us when we shrink Government? Is it going to come at the same time as the growth promised to us by having the lowest effective tax rates in history? In other words IT’S NOT.

    “…no President has been re-elected since the end of World War II when the unemployment rate was higher than 7.2…”

    No President since WW2 has been handed an economy in as bad a shape as Bush left this one either. And the polling is clear that the American public understands that.
    Do this…name a similar economy in a similar hole doing any better than this. If you can’t…any expectations you have of a better recovery are based on nothing but fantasy. Time for you to admit it.

  3. Hey Norm says:

    Also ADP has the private sector gains as being stronger…which means November will probably be revised upward…as were Septembers after you poo-pooed them…and Octobers after you poo-pooed them.

  4. @Hey Norm:

    100,000 jobs in October, the revised number, isn’t exactly much better than 80,000.

  5. @Hey Norm:

    I’ve never said that shrinking government will immediately lead to higher job growth. Government needs to shrink for a completely different reason. We can no longer afford Big Government.

  6. waltm says:

    We’ll find out soon enough who the voters think is responsible.

  7. mantis says:

    Yet another jobs report where the private sector makes solid gains, and the public sector sheds even more workers. Our unemployment problems would be much less severe if the public sector were not being starved by misguided policies, putting millions out of work over the past couple years. But that would be good for Americans, but bad for Republicans election chances, so we can’t have that.

    The only hope Republicans have is continued economic misery, and they will do all they can to make sure we get it.

  8. mantis says:

    We can no longer afford Big Government.

    Actually, we can no longer afford to shrink government. Now now, not in this economy. Unless you want things to get much worse, which apparently you do.

  9. Rob in CT says:

    It ain’t much, but it’s something.

    Hopefully Europe doesn’t go kerflooey and take us with them. We’ll see.

    I was very surprised at the big rally on Wall St the other day. Sadly, I had decided to hedge against possible EuroDoom and switched a bunch of my 401(k) out of equities and into safe stuff… exactly 1 day before the Dow rocketed up 500 points. Awesome. Ah well, my wife’s 401(k) and our brokerage account got the gains, those are mainly in stock funds. It didn’t seem to me that what the Central Banks announced was really all that great. It’s hard to see it fixing the problem. Meanwhile, the market keeps going up. My timing, as usual, is fantastically bad. Sound idea in general. Bad timing. That’s my investment career in a nutshell.

  10. Hey Norm says:

    “…We can no longer afford Big Government…”

    Based on what? Relative to what? Big Government means nothing. It’s a red meat/dog whistle word that excites you and Eric and Jan and Drew and silly people with tea bags dangling from their tricorns and insults the intelligence of most everyone else.
    We certainly cannot afford the Government we have IF we are going to maintain historically low effective tax rates, and fight multiple wars without paying for them, and give Medicare entitlements without paying for them, and refuse to address health care costs…all of which the GOP has done or wants to do.
    We can afford the Government we have with a few pretty basic adjustments. The ACA is a good start but can be improved. The Bush Tax Cuts will expire…that in itself will eliminate the largest single contributor to the deficit, as will ending the wars Bush couldn’t finish. We spend too much on defense. And we spend too much on needless subsidies for agriculture and fossil fuels. Done. Now you can get back to dreaming of your Libertarian Utopia.

  11. john personna says:

    A number of data points have been showing improvement in the US economy. It’s interesting because the vibe in the US (“I can’t get a job” stories in general and at OWS) and in Europe (the slow train wreck) draw so much attention.

    It would be odd if the economy quietly got better while the headlines said otherwise.

  12. John D'Geek says:

    @waltm:

    We’ll find out soon enough who the voters think is responsible.

    That would only be true if we (Republicans) were able to field a viable candidate. Romney might be our most viable, but how many voters will be able to tell the difference between him and our current president? Newt might sound good on Fox news, but how many independents are really willing to vote for him?

    [I changed my name from “John”. Finally figured out a “better” one.]

  13. john personna says:

    “…We can no longer afford Big Government…”

    If we are growing with our spending and Europe is tanking with their austerity, what is the data driven answer?

    This is so strange. Austerity is fueling the train wreck over there. And improvement here is somehow painted as an indictment of our plan?

  14. john personna says:

    @John D’Geek:

    “John de Geek” would have a nice dutch feel 😉

  15. John D'Geek says:

    @mantis:

    Our unemployment problems would be much less severe if the public sector were not being starved by misguided policies, putting millions out of work over the past couple years.

    There’s a difference between employment and gainful employment. Putting people to work in the public sector only counts if they are actually needed. Otherwise, you are actually hurting them. (CF. Drive, Daniel Pink. People need Autonomy, Mastery, and Purpose).

  16. John D'Geek says:

    @john personna:

    “De Geek” … sounds more French or Spanish to me. “John Der Geek” maybe?

  17. Barb Hartwell says:

    They also said many Americans just gave up looking for work, Some took jobs that pay a lot less or they have part time jobssssss. to keep them going, without benefits to keep them healthy. No president is going to help us It`s the greedy SOBs holding things back they control government Republicans are only going to make things worse quicker.

  18. mantis says:

    There’s a difference between employment and gainful employment.

    There’s also a difference between employment and unemployment and destitution. Which is better?

    Putting people to work in the public sector only counts if they are actually needed.

    Counts for what? I’m talking about the economy in the short term, not vague social psychology theories. How useful is “mastery is an asymptote” to someone out of work struggling to feed his kids? It’s useless.

  19. ponce says:

    Obama has added 1.5 million jobs so far this year.

    The last year we had a Republican president he lost 3.6 million jobs.

  20. Rick Almeida says:

    @Doug Mataconis:

    We can no longer afford Big Government.

    Your continual assertion of this claim doesn’t make it any more true.

    For the last 30 years, we’ve chosen not to fund the government.

  21. bandit says:

    You don’t have any intelligence to insult.

  22. john personna says:

    @bandit:

    You don’t have any intelligence to insult.

    lol, says the guy without skills to put a @ in front!

  23. Rob in CT says:

    Having read a bit more closely… this actually isn’t particularly good. Sure, the UE dropped, but largely because a bunch of people stopped trying. Labor force participation dropped (which, in and of itself might not be bad – if, for instance, wages were rising at a healthy clip so households still had money with which to buy things). So yeah, um, meh. At best.

  24. Liberty60 says:

    @John D’Geek:

    There’s a difference between employment and gainful employment. Putting people to work in the public sector only counts if they are actually needed.

    You thought this comment was so startling and controversial it needed a link and citation?

    When more and more people are thrown out of work, unemployment results.

    http://quotationsbook.com/quote/42165/ More citations upon request.

    We have a crisis in public infrastructure, where upwards of a trillion dollars of deferred maintenance urgently needs to be done to crumbling roads, bridges, and ports.

    Any one of these projects would emply engineers, accountants, managers, suppliers, truckers, construction workers, food service vendors, and on and on.

    I wouldn’t oversell it as a cure-all, but the spending of a few hundred billion would have some very positive ripple effects on the economy, as well as provide something we desperately need.

  25. Hey Norm says:

    @ Rob…
    Labor force participation is more than just people who stop trying…it’s boomers retiring, the number of women choosing to work is at a 20 year low, and a lot of people are currently working off the books. We have laid off 35% of our firm over the last three years and I know a lot of them are doing freelance work under the table. So when a partisan hack writes

    “…some 310,000 people simply stopped looking for work…”

    it can be mis-leading.
    I’m not basking in this as if it is the greatest news ever…but the economy is about trends and almost all the trends are in the correct direction. Unless, of course, you are the GOP and are intent on keeping the economy in the dumps for purely political gain.
    Remember too that UE is a lagging indicator.
    The most important thing is that all the recent gains can be wiped out in a hurry if Europe crashes…which is looking more and more likely all the time. Worse yet is that US politicians seem intent on pursuing the same sort of austerity in spite of it not working there.

  26. Hey Norm says:

    @ Liberty 60…
    Yes, yes, a thousand time yes.
    If I were King I would pass the Buffet Rule and use the money specifically for infrastructure and nothing else.
    Look at history…we used to have higher tax rates and we spent the money to build things. The Tea Party answer to the Interstate System would have been “absolutely not – we have to cut taxes more instead”. It’s an answer that is short-sighted and counter-productive.
    Financing is practically free…the bidding environment is still hyper-competitive…and there is plenty of available labor. Build baby, build.

  27. dalmatian7 says:

    @Liberty60: So how was the nearly $1 TRILLION in stimulus that was meant to “create shovel-ready jobs” spent? I thought that was the who point. Infrastructure. Obama himself late admitted”I guess shovel-ready wasn’t exactly shovel-ready”. Secondly, we had a pipeline project from Alberta Canada to Texas that would have created jobs for ” engineers, accountants, managers, suppliers, truckers, construction workers, food service vendors, and on and on.” and costed the taxpayers ZERO that Obama kicked down the road for 18 months. So who’s not really serious about job creation?

  28. dalmatian7 says:

    @Hey Norm: So where did the $1 TRILLION stimulus that was supposed go to infrastructure go exactly? Lest we forget, Obama promised unemployment wouldn’t go higher than 8% if this was passed. Did it create the jobs that were promised? What makes you think that money will be spent appropriately this time around? Just throwing money at a problem never makes it go away., if it did, we wouldn’t have failing public schools.

  29. dalmatian7 says:

    @Rick Almeida: If we have chosen not to fund Governement the past 30 years as you assert, then kindly explain why the national debt is now over $15 trillion?

  30. dalmatian7 says:

    @john personna: What’s fueling the train wreck in Europe isn’t austerity, it’s unfunded socialism. When you pay single mothers to stay at home, allow people to retire at age 45 with full pensions and let people stay on “the dole” for life, you will have created the train wreck we are now witnessing. This btw, is the failed model that the Obama Administration wants to CHANGE the U.S to.

  31. markm says:

    Question: I’ve seen the 315,000 figure all over the place as those that left the workforce. I’ve also seen 487,000 in a few places (for one: http://johnrlott.blogspot.com/2011/12/487000-people-left-labor-force-in.html). What’s with the two different numbers being reported?.

  32. markm says:

    nevermind….I found an explantion.

  33. Hey Norm says:

    “…If we have chosen not to fund Governement the past 30 years as you assert, then kindly explain why the national debt is now over $15 trillion?”

    Um…If we had actually funded Government we would be $15T in debt. Is that really hard to understand? Seriously???

    As to your previous explosion of Fox talking points…here’s where the $819B stimulus – not $1T – went.
    http://www.washingtonpost.com/wp-dyn/content/graphic/2009/02/01/GR2009020100154.html
    Try educating yourself instead of just repeating what you are told to repeat.

  34. anjin-san says:

    So how was the nearly $1 TRILLION in stimulus that was meant to “create shovel-ready jobs” spent?

    Where I live its funding 2 critical infrastructure projects and any number of lesser, but still important ones. In addition to the jobs created, both projects will create significant day to day benefits for people in the area for at least the next 50 years.

  35. Hey Norm says:

    @ anjin-san…
    the list of congress-folks who voted against the stimulus that “…didn’t work…” and then stood in line to collect money and accolades for creating jobs is long…over 100 of the GOP that voted against it went home and took credit for it.

  36. anjin-san says:

    The U.S. labor market added 120,000 jobs in November. The unemployment rate fell to 8.6%, its lowest level since March 2009,

    From the WSJ. The right will work hard to keep this from becoming the meme…

  37. Rick Almeida says:

    @dalmatian7:

    If we have chosen not to fund Governement the past 30 years as you assert, then kindly explain why the national debt is now over $15 trillion?

    Because we cut taxes dramatically. I should have been more clear.

    We have chosen to fund the government with debt instead of tax revenue.

  38. markm says:

    @anjin-san:

    Other than looking at the 8.6% number, i’m not sure why you would want that meme. Almost half of the 120,000 added are seasonal and almost three times that many left the workforce.

    That’s not very positive is it?.

  39. waltm says:

    @John D’Geek:
    Even slow horses win when the lead pulls up lame. I now return you to the the whichness of why debate, political boards are prone to.

  40. John D'Geek says:

    Well, let me try this way.

    “Life isn’t fair, highness. Anyone who says otherwise is selling you something.” Wesley, The Princess Bride.

    Let’s assume, for just a moment, that all those economists that quote growth in GDP as the economic indicator are on to something. Taking this from a strictly economic PoV, what this means is that all expenditures — public or private — can be categorized in one of three ways: Net Producer, Net Consumer, Investment. “Net producer” is an expenditure that creates more GDP than it uses (and, thus improves the economy); “net consumer” is an expenditure that creates less GDP than it uses (and thus drains the economy); and “investment” is an expenditure that appears to be a drain in that it does not create much GDP in the short term but provides GDP growth in the long term. Investments are complicated creatures that may or may not provide real GDP growth, depending on many variables. (i.e. “is this bridge one ‘to nowhere’, or will it enable commerce?”)

    I would argue that Education — when properly provided — is an Investment. Police and Defense, while absolutely critical to our nation’s infrastructure, are both Net Consumers from an economy’s PoV. These expenses are worth it, provided they are properly budgeted. But all that assumes that you trust the government.

    Which I don’t.

    This does lead to one inescapable conclusion, however: when we are talking about the economy, not all jobs are created equal.

    To boost the economy, you have to do two things: add net producers; and remove net consumers. In a time of peace, we can reduce our armed forces; in a time of war, we can only reduce public services and infrastructure spending.

    Cruel? Yes. Necessary? Unfortunately, yes.

    From a Liberal PoV, you feel that I am ignoring suffering people, right? To me, the obvious reality that there are people out there that want us dead — no matter what the cost. Defense spending is no longer optional.

    That means other spending has to go — no matter how cruel it may seem.

    In the end I feel compelled to point out the same thing that two MIT professors pointed out (that I’m feeling too lazy to look up the reference for): we are no longer in an Industrial Economy. We’re in an Information Economy. We have two choices: more well-trained entrepreneurs or rampant poverty.

    I prefer the former.

  41. sam says:

    @John D’Geek:

    Problem there is that, while we may be an information economy in some ways, we’re still a consumer economy in many, most, all others. How would you respond, then, to this argument.

    We have a consumer economy. But we cannot depend on the wealthy to spend enough of their money to keep the engine moving. They simply cannot and will not buy enough goods. There’s only so many tvs, cars, so much food, so much what have you, that they can and will buy. So, via redistribution, we take some of the money they cannot and will not spend, and put it in the hands of those who will spend it. Thus, via redistribution, the consumer-driven engine of our economy continues to function and thrive. This works to the advantage all, since the more successful the economy, the more the wealthy and the recipients of redistribution benefit.

  42. Ben Wolf says:

    To boost the economy, you have to do two things: add net producers; and remove net consumers. In a time of peace, we can reduce our armed forces; in a time of war, we can only reduce public services and infrastructure spending.

    Ths is backwards. We need more consumption and more demand, not less. Perhaps you haven’t noticed the trillion dollar hole in consumer spending, or perhaps you continue to cling to the quaint notion that supply all by itself produces prosperity.

    In the end I feel compelled to point out the same thing that two MIT professors pointed out (that I’m feeling too lazy to look up the reference for): we are no longer in an Industrial Economy. We’re in an Information Economy. We have two choices: more well-trained entrepreneurs or rampant poverty.

    The information economy was and is a libertarian fantasy, one which we’re regularly told will become reality any decade now. Unfortunately this particular Cato Institute shibboleth has produced 100,000 net jobs at best due to rapid development of automation in IT services. It will never provide mass employment.

    By the way, notice the assumption underlying your entire argument: some economic supermen (enterpeneurs) will, if conditions are just right, come along and save the greedy, lazy masses by providing prosperity. I’d suggest using your copy of Atlas Shrugged as a doorstop rather than reading it, or perhaps you could make some slight effort to put empiricism and observation above the groundless theology you’re preaching.

  43. Scott O. says:

    @John D’Geek:

    To me, the obvious reality that there are people out there that want us dead — no matter what the cost. Defense spending is no longer optional.

    Can you be more specific here? Who are these people that want us dead? Al Qaeda, or it’s remnants? How many tanks do they have? How many aircraft carriers? And what happened to:

    These expenses are worth it, provided they are properly budgeted. But all that assumes that you trust the government.

    That doesn’t apply to defense?

    Here’s the real question, do you really think we need to maintain cold war level defense spending now?

  44. anjin-san says:

    That’s not very positive is it?.

    You might want to go back and look at Bush’s job numbers. Cleaning up the disaster he left is a massive job for Obama and there is no easier, softer way to do it. But, buy all means, keep spinning. Finding suckers on the right is not hard to do.

  45. markm says:

    @anjin-san:

    I’m not spinning anything nor talking about previous administrations.

    Looking at the data released today, to get to the 8.6%, people had to give up looking for work…almost 3x more than were added last month. That’s not spin.

  46. Liberty60 says:

    @dalmatian7:

    So how was the nearly $1 TRILLION in stimulus that was meant to “create shovel-ready jobs” spent?

    Echoing anjin-san-

    Cal-Trans is using some of the “shovel-ready” money to upgrade and improve the 405, 22, and 710 freeways near where I live.
    By my estimate, there are a couple hundred guys working each day, and of course unseen numbers of engineers, planners, accountants and all the other people who contribute directly to a project like this.

    I would bet that nearly every penny of those hundred/ thousands of paychecks is spent on grocery stores, car dealership, furniture stores….I think an economist might call that stimulating.

  47. john personna says:

    @dalmatian7:

    Only problem is, that 45 YO retirement stuff is made up. Millions retire at that age? Or just an internet rumor that some do? Link to actual average retirement age by country?

  48. Ben Wolf says:

    @Liberty60: You can see the effects of stimulus by simply looking at quarterly GDP for the last three years:

    http://www.tradingeconomics.com/united-states/gdp-growth

    Starting in the 4th quarter 2009, exactly when the aggregate effects of stimulus would be expected to appear, economic growth went positive, albeit weakly. The stimulus worked, it was just too small and too short to push the economy back to full employment.

  49. john personna says:

    Here is a pretty good chart by country. The accompanying article notes:

    OVER a million French protesters took to the streets this week to contest the government’s plans to raise the legal minimum retirement age from 60 to 62. The French spend longer in retirement than almost anybody else

    1. Not exactly 45

    2. Not that far from the US Social Security ages

  50. Hey Norm says:

    I’m thinking Dalmation is JWest reincarnated.

  51. ponce says:

    From the WSJ. The right will work hard to keep this from becoming the meme…

    The wingnuts can try, but…Google News top headline:

    US unemployment rate falls to 8.6% in November, raising hopes for growth

  52. Stan says:

    @Doug Mataconis: I cannot believe that a sentient human thinks that the cure for a recession is governmental budget cutting. As history buffs know, the austerity program of Heinrich Bruning in the early 30’s was the main factor causing the rise of the Nazi party. More recently, the British Tories are again demonstrating that austerity during an economic downturn only makes things worse. I don’t know of any case in recent history in which a pronounced downturn in the economy was reversed by cuts in government spending. By comparison with DM’s views on economics, believing in unicorns is unblemished rationality.

  53. Stan,

    Please find where I said anything resembling the worlds “government budget cutting is the cure for a recession.”

    You won’t, because I haven’t.

    I do not, however, agree with the proposition that increased government spending is the cure for our current condition either. We are only going to get out of this by creating jobs in the private sector, where people do jobs that are actually productive.

  54. John D'Geek says:

    @Ben Wolf:

    Read closer.

    I said “Net Producers” and “Net Consumers”, all of which is from a GDP PoV. This has nothing to do with “Consumer driven economy”, which is really just saying that we value demand more than supply. Having a GDP, by necessity, makes the assumption that there are consumers consuming what was produced. I doubt any serious economist would say that having $20 million worth of goods sitting in the docks rotting adds to the economy.

    A “Net Consumer” is one who takes from the GDP than he/she/it or they put in. A “Net Producer” is one who puts more into the GDP than he/she/it or they get out. Maybe poor word choice on my part, but I’m not referring to Consumption here.

    GDP is not a measure of employment — it’s a measure of production.
    Now it may be that these economists are wrong to point to GDP as the economic indicator (and I’ll welcome a chance to review solid research to the contrary), but if they aren’t wrong then it’s — unfortunately — just as simple as I said.

    A Factory worker that produces, say, a million dollars worth of automobiles adds to GDP. A Police Officer — no matter how good they are at their job or how necessary they may be to the community — is not contributing to GDP. Not because they aren’t important — I’m sure as heck not living in a lawless neighborhood — but because they aren’t producing anything.

    And that means that they aren’t helping the economy.

    What I believe you were talking about is a “Consumer driven economy” vs a “Savings driven economy”, to which I’ll simply refer you to Peter Schiff. The hyper-simplified version is that there is no evidence that the government should be encouraging spending at the expense of saving.

    “Taxing the rich” is a completely different subject.

    As for defense spending, the correct (though decidedly not PC) answer is “I’ll let you know after I have access to all the relevant classified information that all defense decisions are really made on.” I will say that our “enemies list” is not very small, thanks to our forebears (both parties, thank you very much). Focusing on terrorists ignores the situation in Iran and North Korea, or the pirates in the Indian ocean.

    Defense is not as simple as it used to be.

    We need expanded Special Operations Forces to go after terrorists, and they aren’t cheap. Neither are their “toys”. Iran and North Korea aren’t going to play nice any time soon, so we need to be prepared for a “conventional war” on either or both of those fronts “just in case”.

    That said, I would love to see the whole Federal Government get efficient in their spending, and the best way of doing that is to starve them a bit. Unfortunately, that only works if the spending cuts are deep, long term, and reasonably distributed. Otherwise, we continue the perennial game of “We’ll be fine when the ” (Democrats for Entitlements; Republicans for Defense and Security) ” get back in power” game that we’ve had as long as anyone can remember.

    What do we have on the hill? Democrats refuse entitlement cuts; Republicans refuse defense cuts. Same tune, different beat.

  55. john personna says:

    @John D’Geek:

    You have some basic misunderstandings of GDP. Every time a policeman fills up the tank on the cruiser he contributes to GDP. Every time a uniform is laundered, it contributes. Every squirt of pepper spray adds up.

    Now, there are some alternate measures of economic output, and you might look into them.

  56. john personna says:

    (No doubt while the cop is “unproductive” the laundry owner or pepper spray bottler is a “productive” private employer!!!)

  57. john personna says:

    @Doug Mataconis:

    What a funny comment. You didn’t say cutting would help, and you didn’t say expanding would help.

    Truly we live in the best of all possible worlds.

  58. john personna says:

    On consumption as jobs-expanding:

    I’m a very rich person. As an entrepreneur and venture capitalist, I’ve started or helped get off the ground dozens of companies in industries including manufacturing, retail, medical services, the Internet and software. I founded the Internet media company aQuantive Inc., which was acquired by Microsoft Corp. (MSFT) in 2007 for $6.4 billion. I was also the first non-family investor in Amazon.com Inc. (AMZN)

    Even so, I’ve never been a “job creator.” I can start a business based on a great idea, and initially hire dozens or hundreds of people. But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate.

    That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small. What does lead to more employment is the feedback loop between customers and businesses. And only consumers can set in motion a virtuous cycle that allows companies to survive and thrive and business owners to hire. An ordinary middle-class consumer is far more of a job creator than I ever have been or ever will be.

  59. Hey Norm says:

    “…What do we have on the hill? Democrats refuse entitlement cuts; Republicans refuse defense cuts. Same tune, different beat…”
    Except this is completely false…which is to say it’s a lie.
    Democrats have repeatedly offered to cut entitlements in negotiations. The GOP refuses to negotiate. Period.
    The facts are not matching your ideology.

  60. Jr says:

    The 315,000 people who left the workforce accounted for 2% of the drop, so for all the doom and gloom it is still a good report. Car Sales are up, consumer confidence and spending was already on the rise.

    All evidence points to the economy is growing, now Europe going under could destroy the momentum…….

  61. Gerry W. says:

    @John D’Geek:

    Defense is not as simple as it used to be.

    And I could say that employment is not as simple as it used to be.

    As I have said for years, we added 2 billion cheap laborers to the free markets system, also automation and more loss of jobs, six sigma and more loss of jobs, and mergers and consolidation and more loss of jobs. We have not seen this phenomenon in our lifetimes. The housing industry is in the dumps, we sent 1/3 of our manufacturing overseas, people are dislocated with what jobs are offered, and there is more income inequality. We were told years ago that we were going to be a service and information society and that we did not need manufacturing. So, to this day, I don’t know what will replace the closed factories in my town.

    Also, what we used to do, was give tax cuts so that people spend into the economy, but since we have more foreign goods on the shelf, does spending translate into a better economy as in the past? And what widgets can we build here and not some other country? I have no answer for that, just a question on the severity of globalization.

    And as far as creating jobs, the democrats are spending, the republicans want more tax cuts, the fed is printing more money, and the states are going to casinos for jobs. In the meantime, we keep sending jobs overseas.

    So, I believe, the conversation should be more global orientated and understand what 2 billion cheap laborers will do to our middle class jobs and wages.

  62. Stan says:

    @Doug Mataconis: I agree that the budget should be balanced over the long run. I don’t agree that it should be balanced now. Doing so would be catastrophic. It would repeat Bruning’s blunders in Germany during the early 30’s and FDR’s austerity program in 1937 that brought on the Roosevelt recession. Demand is already weak. Why make it weaker by futile attempts at fiscal rectitude?

  63. sam says:

    @john personna:

    And via JP’s link, we have a very rich person lending his support to the argument I made above:

    Since 1980, the share of the nation’s income for fat cats like me in the top 0.1 percent has increased a shocking 400 percent, while the share for the bottom 50 percent of Americans has declined 33 percent. At the same time, effective tax rates on the superwealthy fell to 16.6 percent in 2007, from 42 percent at the peak of U.S. productivity in the early 1960s, and about 30 percent during the expansion of the 1990s. In my case, that means that this year, I paid an 11 percent rate on an eight-figure income.

    One reason this policy is so wrong-headed is that there can never be enough superrich Americans to power a great economy. The annual earnings of people like me are hundreds, if not thousands, of times greater than those of the average American, but we don’t buy hundreds or thousands of times more stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. Like everyone else, I go out to eat with friends and family only occasionally.

    It’s true that we do spend a lot more than the average family. Yet the one truly expensive line item in our budget is our airplane (which, by the way, was manufactured in France by Dassault Aviation SA (AM)), and those annual costs are mostly for fuel (from the Middle East). It’s just crazy to believe that any of this is more beneficial to our economy than hiring more teachers or police officers or investing in our infrastructure.

    More Shoppers Needed

    I can’t buy enough of anything to make up for the fact that millions of unemployed and underemployed Americans can’t buy any new clothes or enjoy any meals out. Or to make up for the decreasing consumption of the tens of millions of middle-class families that are barely squeaking by, buried by spiraling costs and trapped by stagnant or declining wages.

    I asked John D’Geek to respond, but he did not.

  64. john personna says:

    I have another reading suggestion. This one cuts to a more fundamental level of how our economics and politics work:

    The invisible hand meets the invisible gorilla: The economics and psychology of scarce attention

    Some years ago I’d talk here about the “attention economy” and how markets and politics turned as people suddenly decided to pay attention. As the article reminds us, it matters also how much we miss in the inattention phase.

    You could probably explain the tag-team of not-Romenys as an attention economy at work.

  65. Drew says:

    “Um…If we had actually funded Government we would be $15T in debt. Is that really hard to understand? Seriously???”

    You may have heard of two forms of financing – equity and debt -used by almost every individual, corporation and state entity in the country. Never mind, based on the body of your comments finance is, shall we be charitable and jus say, not your strong suit.

  66. physics geek says:

    For the last 30 years, we’ve chosen not to fund the government.

    I had planned to actually respond to this fatuous statement. However, having read other comments by the author, I figure that no amount of actual evidence will be sufficient to render the sky blue.

    Actually, here’s the solution: the government hires EVERYONE. 100% employment. Where would the money come from to fund such a thing? Apparently that question is not helpful. Neither is believing in unicorn-based economics.

  67. Ben Wolf says:

    What I believe you were talking about is a “Consumer driven economy” vs a “Savings driven economy”, to which I’ll simply refer you to Peter Schiff. The hyper-simplified version is that there is no evidence that the government should be encouraging spending at the expense of saving.

    Whether you like it or not this is a consumer driven economy. The whole point of deficit spending is that it allows the private sector to save: only when government balances its budget or runs surpluses does it encourage the private sector to live beyond its means. Please explain this to Peter, as he has no understanding of sectoral balances.

  68. Eric Florack says:

    Doug;
    Not even close.

    The real story here is the manipulation of these figures by the Federal government. The real story is that while the number reported to the press, which is internally known as u3, has gone down to 8.6, the real number of unemployed… which includes those who have essentially given up lookjng for work, called U6, has risen to 16.8. The people in that category are the ones who after 99 weeks of not being able to find a job of thrown up their hands and said the hell with it a I’ll sit on my hands. That number is been steadily growing, and it’s a figure that has never really gone down during the Obama administration. That’s the real measure of the economy, and of the employment situation.

    The the number of people of the looking for jobs just within last few weeks as 315,000. That’s why the bureau of labor statistics own figures the number of jobs actually created was 120,000. Again by the bureau’s own figures and yet, we have a lower unemployment rate reported? That 315000, are included in the U^ figures.

    So, by their own figures….the fact of the matter is more people left the work force for that. And actually got jobs. And yet, the Federal government reports a lower unemployment rate and the press the trumpets it? We’re being lied, to, Gang.

    Why would the Federal government fudge such numbers? The answer’s rather simple. No president in history has ever been reelection it with an unemployment figure of 9% or more. What we have here is an attempt to save the current administration from its own misdeeds.