Dr Peter Morici: The US 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. The December three
month average was 172,000, below the annual averages for both 2012 and 2013,
which were 180,000 and 188,000.
The unemployment rate fell to 6.7% 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 Obama took office, unemployment would be about
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
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 to 5%.
The pace of GDP growth during the Obama and Bush
recoveries has been about the same—2.3%. The Reagan recovery accomplished 4.9%
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 US 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
Professor, Robert H. Smith School of Business, University of Maryland,
College Park, MD 20742-1815,
703 549 4338 Phone
703 618 4338 Cell Phone
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