Sunday "Homework Assignment" .... The Jobs Outlook ... Not so Bad but Not so Good Either

Economic growth is picking up, but jobs created remain far too slow for the fifth year of an economic 'recovery.'


The Latest Jobs Miss has the details and one picture pretty much tells the whole sad story:


"Just when you think it might shift into higher gear, the economy delivers a thud like Friday's disappointing jobs report for December. The Labor Department says the U.S. produced only 74,000 net new jobs in the month, while the jobless rate fell to 6.7% from 7% mainly because some 347,000 Americans left the labor force.

The saving grace may be that winter weather is responsible for some of the sharp decline from the recent monthly trend closer to 190,000 new jobs, and it's possible the numbers will be revised upward as they were last December and this November. Recent economic indicators, including the private ADP jobs survey and consumer confidence, had suggested better job news.

            

                                                          

There isn't much else good to say about the report. Average hourly earnings rose a paltry two cents to $24.17, or a mere 1.8% for the year. Average hours worked in a week fell a tic to 34.4. Even with inflation low, this suggests that real median income may have declined for all of 2013. In the fifth year of an expansion, this is dreadful underperformance.

Another sign of the weak recovery is the failure of the employment-population ratio to rebound. This is a favorite of labor economists because it signals how well the economy is luring Americans into the labor market. The bad news is that the ratio remained at 58.6% in December, barely above its post-recession low of 58.2% in July 2011 and well below the 59.4% in June 2009 when the recession ended. 

            

                        

This is more revealing than any single month's jobless figures because it underscores the danger that the U.S. may be close to having what the Europeans have long called their "structural" unemployment problem.

As the nearby chart shows, the employment ratio fell off a cliff in 2008 and hasn't been able to climb more than a little of the way back. This reflects the overall lack of job creation and helps to explain why the larger jobless rate, which includes "discouraged" workers who have left the workforce, remains a dispiriting 13.1%."

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For the curious among us, here's another article to ponder in Hiring Slowdown Blurs Growth View. It's appropriately subtitled 'Dismal Jobs Report Raises Questions Over Economy's Strength as Year Ended; Bad Weather a Factor?' We'll quote from its contents very briefly:

            

"The jobless rate fell to 6.7% from 7% for the month, the Labor Department said, though the decline mostly reflects job seekers giving up their search and leaving the workforce.

The downbeat readings were partly attributed to distortions caused by bad weather, and many economists warned that the report may prove to be a fluke. Employers, too, are reporting a mixed take on the economy and their labor needs."

Summing Up

A nation's economic growth and prosperity are primarily attributable to three basics: (1) how many of its people are working (see chart above); (2) how many hours those people are working; and (3) the productivity of those people while they are working (more output for the same input or the same output for less input).

It's really that simple.

Baby Boomer retirements (forced and unforced), long term discouraged would-be workers dropping out of the work force, entitlements making work somewhat less attractive, technological advancements making us all more productive and global competition are all important pieces of the labor force participation mix and unemployment issues today.

We just don't know which portion of the problem to assign to which individual factor, so we'll stay tuned and see how 2014 unfolds.

In the meantime, keep the faith, my fellow Americans. I'll do the same.

Thanks. Bob.