TOPICS > Economy

Jobless Reading Holds Bright Spots, But Many Quit Searching

January 7, 2011 at 3:27 PM EDT
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Employers added 103,000 new jobs in December and unemployment dropped to 9.4%, but the recovery fell short of forecasts. Judy Woodruff looks behind the numbers with Catherine Mann of Brandeis University and John Challenger, CEO of Challenger, Gray & Christmas, an outplacement firm.
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JUDY WOODRUFF: The U.S. economy added jobs in December, and the unemployment rate dropped. But the newest numbers from the federal Department of Labor also fell short in some important ways.

For American workers, the jobs report was decidedly a good news/bad news story. On unemployment, the good news was, the rate dropped, from 9.8 percent to 9.4 percent. That was the lowest it’s been in 19 months. The bad news, the drop was mainly because so many people stopped searching for work, so they were no longer counted as unemployed.

Likewise, on job creation, employers added 103,000 new positions in December, nearly all of them in the private sector. But it takes 125,000 just to meet population growth. The number would have to be twice that large to make a real dent in unemployment.

The chairman of the Federal Reserve Bank, Ben Bernanke, underscored the point at a Senate hearing this morning.

BEN BERNANKE, Federal Reserve chairman: The economic recovery that began a year-and-a-half ago is continuing, although, to date, at a pace that has been insufficient to reduce the rate of unemployment significantly. At this rate of improvement, it could take four to five more years for the job market to normalize fully.

JUDY WOODRUFF: Today’s report did show the economy generated 70,000 more jobs than first estimated in October and November. But Bernanke said the large pool of the long-term unemployed remains cause for concern.

BEN BERNANKE: Roughly 40 percent of the unemployed have been out of work for six months or more. Long-term unemployment not only imposes exceptional hardships on the jobless and their families, but it also erodes the skills of those workers and may inflict lasting damage on their employment and earnings prospects.

JUDY WOODRUFF: For his part, President Obama gave an upbeat assessment as he toured a window manufacturing plant in Landover, Maryland, just outside Washington.

U.S. PRESIDENT BARACK OBAMA: The trend is clear. We saw 12 straight months of private sector job growth. That’s the first time that’s been true since 2006. The economy added 1.3 million jobs last year. And each quarter was stronger than the previous quarter, which means that the pace of hiring is beginning to pick up.

JUDY WOODRUFF: The president also named four new members of his economic team. Gene Sperling, a Clinton administration veteran, was tapped for director of the National Economic Council. Jason Furman will be assistant to the president for economic policy.

The president also nominated Heather Higginbottom to be deputy budget director and Katharine Abraham for the Council of Economic Advisers. Those two positions are subject to Senate confirmation.

In response, John Boehner, the new Republican speaker of the House, issued a statement saying Americans aren’t looking for new faces, but new policies to cut spending and grow the economy.

For a deeper look into just what today’s jobs numbers reveal, we turn to Catherine Mann. She’s professor of economics and finance at Brandeis University. And John Challenger, he’s chief executive officer of the outplacement firm Challenger Gray & Christmas, which recently surveyed people out of work for extended periods.

Thank you both for talking with us.

Catherine Mann, to you first. As you look at these numbers, what strikes you? What is most important here?

CATHERINE MANN, professor of economics, Brandeis University International Business School: Well, you know, I was ready to cheer when I saw the unemployment rate, when I first looked at the numbers this morning, going down to 9.4 percent.

And it was only when we started looking at the underpinnings that it sort of became far more nuanced. It is a problem that the bulk of the improvement has come from people who have left the labor force, primarily men who have left the labor force and are no longer looking for work. And so that’s why the unemployment rate fell so much.

Now, there are some bright spots. The nature of the job creation, leisure and hospitality, one can argue that people are feeling a little bit better about their pocketbook, that they’re willing to go out for dinner, they’re willing to go for a weekend away.

Health is a very strong sector as well. Maybe some of those procedures that were put aside because of concerns about leaving work for any period of time, maybe those have been alleviated somewhat. So, there are some bright pictures.

But, generally speaking, when that many people leave the labor force, when our labor force participation rate, in other words, the number of people who are actually out there looking for work, is at a 26-year low, you have got to wonder about the state of the economy.

JUDY WOODRUFF: Why are so many people giving up looking?

CATHERINE MANN: Well, one reason why a number of people gave up in December was they thought that their unemployment benefits would be tapped out, that there wouldn’t be an extension of the unemployment benefits.

And if there’s — if you are not going to get a benefit from saying that you’re unemployed, then why put yourself through that? You have to go into the office and say you’re looking for a job and that sort of thing.

So, it’s possible that the return to the extension of unemployment benefits that was voted in will actually lead to in January more people looking for work, which is a good thing — hopefully, they will find jobs — and perhaps even a stable unemployment rate.

In addition, the other part of the program that was put forward in the legislation was this reduction in the payroll tax that employers have to pay when they hire somebody new, so that their new hires will have this reduction in unemployment — in — in payroll taxes, and that could also support employment going forward.

JUDY WOODRUFF: Now, John Challenger, your initial take, you told us, on these numbers, not as discouraging to you as they were to Catherine Mann.

JOHN CHALLENGER, Challenger Gray & Christmas, Inc.: Well, it’s so often we get — in this period of time, coming out of a recession, now in a very difficult recovery process, it seems like every piece of news is interpreted negatively, pessimistically.

And, yet, think about it. We saw unemployment take a big drop, 9.8 to 9.4 percent. We saw the previous months, two months, revise upwards. That’s always a positive sign. In tough times, those numbers are usually revised downwards. And we have had a series of very positive pieces of news.

We saw downsizing in 2010 at its lowest ebb since 1997. We saw the ADP report come out with very strong job creation numbers, certainly another look at the economy. And we have seen jobless claims numbers now in the last month of December come down below 400,000 for the first time in a long time.

So, there are a lot of good things happening. But what happens, when unemployment is still so high, that it just seems like we’re never going to come out of it or never get back to where we were before.

JUDY WOODRUFF: And we did hear Catherine just say that never — what, not since the Great Depression have we seen unemployment rates stay this high for so long.

Your firm, as we said, has just recently been interviewing or surveying people out of work for a long time. Tell us some of what you found.

JOHN CHALLENGER: Well, many of those people have had very tough times finding work, getting their foot back in the door.

So now what’s happening is, they are going back and taking part-time jobs. They’re exploring whether or not they even do volunteer work to show, put something on their resume that suggests they have been taking this period of time to add to their skills. It might be going back to school.

But they are certainly frustrated. One of the big really aftermaths of this process, this recession we have been in, is there are a lot of people, this segment of people who have been stuck during their unemployment period, not able to find a job. And, hopefully, that’s now beginning to change.

JUDY WOODRUFF: Catherine Mann, how does that square with what you see in these numbers and your study over time of unemployment?

CATHERINE MANN: Well, we have seen that the number of people who have been unemployed for more than six months is now a higher share of the unemployed than ever before. So, it is very important for those workers to try to show that they retained skills, may be gaining new skills.

And so to the extent that they have gone off and done volunteer work or really anything that they can put on their resume, that’s a very important way of showing that you continue to be attached to the work force.

So, on the one hand, it’s a good thing to do. On the other hand, of course, these workers would much rather have a full-time job doing the things that they were doing before. There are a number of reasons for why we have this very sticky unemployment rate that’s been so high. It’s not just the state of the economy.

But some of it also has to do with the difficulties of people moving. If you have a house that’s underwater or you can’t sell it, then it’s going to be very difficult for to you move to a place where you might be able to get a job. And in addition, if you are not really sure about that job, the last thing you’re going to do is move and put yourself in a situation where you may not have a support structure around you — skills mismatch being another component of that, age being a third element that may make it more difficult for people to get back into the labor force.

JUDY WOODRUFF: And, John Challenger, you’re talking to employers all the time. One of the other things we hear is that employers, many of them, are feeling they can get by with fewer employees, that lean and mean is the way to go. And there’s no — in the near term, there’s no reason for them to do it any other way.

JOHN CHALLENGER: Well, certainly, it’s one of the things employers learn how to do during a recession. They cut workers. They add technology. And we have seen technology spend go up in 2010. And so they learn to deal with it.

And then, in fact, what happens is that they hire temporary workers, which we have seen growing, those job creation numbers, really growing to meet the added demand as the period of recovery begins to move on. It’s certainly very possible. It has happened in past recessions.

Maybe there’s a structural change, but it looks like they will start to convert those temporary workers into full-time workers. We are hearing a lot of frustration from people, these long-term unemployed, that what happens to these employers, though, as they go out and look for jobs is they have got people who have just come into the job market, and they have got the people who have been out there for a while, and, all things being equal, they end up choosing, the employers, the people who are newer in the market.

So, working on how to help the people who have been caught in this recession, been out for a long time get back on their feet is a crucial part of the policy we have to address going forward.

JUDY WOODRUFF: All right. Catherine Mann, John Challenger, looking at today’s jobs report, we thank you both.

CATHERINE MANN: Thank you.

JOHN CHALLENGER: Thank you.