In December the U.S unemployment rate fell to 6.7%. This should have been good news. Being below 7% should be a good thing. It should have been something that was seized on by economists as a sign that the US economy was continuing to recover and move out of the doldrums. We should have seen Democratic partisans run to the nearest microphone to take credit for Presidential economic policies that have led us to this point. (BTW the ability of ANY President-- Republican or Democrat-- to take credit or blame for a single data point in the massive system that is the US economy is far overstated but that never stops supporters or detractors from trying to give him credit or blame in good times or bad).
But this time there was no Vice-President Biden braying and bragging about a "recovery summer" on the way. That's because the greatest nation on the earth, a place that put a man on the moon and defeated Hitler and Tojo in just four years, was only able to create a net 74,000 jobs. Even by the standards of the so-called recovery we've been having this was a horrible number. The average net increase for 2012 and 2013 was a net 182,000 jobs. Even those numbers were just barely short of what was needed to keep up with population growth. The unemployment rate is only below 7% because more people gave up and moved out of the workplace. It's not because companies are on hiring sprees. They're not. At least they're not hiring in the United States.
So this number is hopefully something of a statistical fluke. Maybe there was something that was going on in December that won't be repeated again. Maybe this was the initial impact of ObamaCare. The health care sector lost 6000 jobs. Maybe this had something to do with colder weather. Maybe someone didn't get a clean compile on a program and so the number will be adjusted upwards in the coming months. We shall see. For now all we have is this data. What's more troubling than the unemployment rate is the reason why it's fallen. The overall labor participation rate is hovering at 62.8 percent, which is the lowest level in some 35 years. This is weird. I've always wondered about this because for me, there's no choice but to either be working or looking for work. I'm not yet rich enough to retire. There's no one who would be willing to work in order that I could pursue a life of leisure. So if I lost my job I'd have to keep looking for another one and/or create my own business. And I don't think I'm alone. So what are these discouraged workers doing? That's a mystery. Clearly some of them are working off the books, going back to school, relying on family and friends for food, shelter and income, going on disability or retiring.
If the low labor participation rate was being primarily driven by retirements, that is by an increasingly older population, well then it would be nothing to worry about. The problem is though is that it's not being driven by retirements. The labor participation rate for workers 65 and older has been on a near inexorable rise since 2000 or so. People are increasingly delaying retirement because they simply can't afford it. Those old people you see in grocery stores or big box stores working as clerks or greeters aren't there because they're bored. No, they need the money, thanks in no small part to the financial sector's destruction of their retirement wealth I would guess. And even among younger workers aged 45 to 54 the labor participation rate is 79.2%, which is the lowest since 1988. As I've wondered before, we may be in a situation where thanks to automation, weak unions, outsourcing and wholesale transfer of industries overseas, the US economy simply doesn't need as many workers as it did before. Period. The average duration of unemployment calculated for December was 37.1 weeks. It was 38 weeks a year ago. So it's not as if this economy has been doing well for a long time now.
The other interesting thing about the job numbers is that not only were most of the gains in low wage sectors (retailing, leisure, and hospitality) but for the first time since 2007 ALL of the net job growth went to one gender. Women. Men had a net loss in jobs. Again, this may all be "statistical noise" which will be corrected in coming months. But right now it looks to me like we have an economy that excels in creating low wage jobs and bailing out banks but doesn't seem to be able to create jobs which support a strong middle class. As usual the black unemployment rate was twice that of the white unemployment rate while the "did not graduate high school" unemployment rate was three times that of those with a college degree. And although both political parties will use this report in their battle over extending unemployment benefits again, I think this report and the mostly anemic jobs reports that came before it only support my belief that we need some radical changes in economic policies.
Growth in jobs slows sharply