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The jobs report: Don’t break out the champagne

Job seekers attend a career fair in Overland Park, Kan. The unemployment rate fell last month to its lowest level in more than two and a half years, as employers stepped up hiring in response to the slowly improving economy. Photo: AP Photo/Charlie Riedel

In brief: The Bureau of Labor Statistics’ household survey shows unemployment at 8.6 percent, and the payroll survey shows 120,000 new jobs in November (140,000 from the private sector, and a loss of 20,000 in the public sector). BLS also revised upward its job numbers for September and October.

What does it mean? We’re not out of the woods but we might be seeing some daylight.

Maybe. Here’s what you need to worry about:

First, this rate of job growth is barely enough to keep up with the growth in the working-age population. So we’re not making progress on the backlog of more than 13 million jobless Americans, and another 11 million working part-time who’d rather have full-time jobs.

Second, retail jobs constituted a third of new private-sector employment in November. Retail jobs tend to be unstable, temporary and low-paying. Although the BLS is supposed to adjust for seasonal employment (i.e. Christmas), it doesn’t take account of the fact that more and more Americans have been pushing up their Christmas buying to before Thanksgiving. So some of these jobs may not be around very long.

Third, the jobless rate fell partly because around 350,000 people who had been looking for jobs dropped out of the job market in November. Remember: If you’re not actively looking, you’re not counted as unemployed on the household survey.

Fourth, hourly earnings are down, as are real wages. So to some extent Americans have been substituting lower wages for lost jobs – either by accepting lower wages at their current place of employment, or getting the boot and settling for lower wages elsewhere. A job is better than no job, of course, but a job with a lower wage isn’t nearly as good as a job with at the same or better wage.

Fifth, another reason for November’s job growth is that American consumers – whose spending accounts for about 70 percent of the economy – increased their spending. But this can’t continue because, as noted, wages are dropping. They spent more by cutting into their meager savings. Don’t expect this to last.

Finally, there’s the wild card of the rest of the global economy – the European debt crisis and the high likelihood of recession in Europe, the slowdown in China and India, slower growth in developing nations. Some of our jobs depend on exports, which will drop. Others are keyed to the financial sector, which is being hit directly.

Two final wild cards closer to home: The Fed and Congress. The Fed meets in two weeks to decide on further monetary easing. With today’s report, the odds of easing are down, unfortunately. Believe it or not, several Fed members are worried about inflation.

And if Congress refuses to extend the payroll tax cut and/or unemployment benefits by December 30, it will create another drag on the economy. When people ask me what Congress is likely to do I always say the same thing: The odds are in favor of nothing.

So while today’s jobs report is a step in the right direction, it’s way too early to break out the champagne.

Published by arrangement with RobertReich.org.

Robert Reich is Chancellor’s Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written 11 books (including his most recent, “Supercapitalism,” which is now out in paperback).

 

Comments

  • demand_sider

    Real wages are what counts. All else is noise.

  • Anonymous

    Congress must do nothing to stop unemployment if they want to stick to their plan of keeping unemployment high until Obama is out of office.

  • Jerryfh65

    The greed of hte people that moved the businesses out of the country and our politicians that provided tax breaks so they could move, Also the republicians are so set on defeating Obama in the next election that they are willing to destroy our country.

  • stupid savant

    I have tried to get some people to do some things so I have left a few comments about some of the problems on this site. I do not hold much hope.
    So I am going to tell you how to change everything. We have been on the verge of changing the world from an oil economy to an electric. I have watched with the science already here the inability of anyone to do it. So this is how it is. I will do it. I have an IQ over 180. I have looked at both nano silicon, nano carbon etc,. etc,. From Chung at Stanford etc.
    Now Dr Chung seems to think a battery made this way could get 10 times the storage as the best lithium today. Others say only 5 times.
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    If it gets 10 then it is 2000 miles a charge. I will find out because I don’t need an investor. I do not need venture capital. 
    I will bring in a few of my favorite engineer students and we will have a battery that we can put in a chevy volt and get at least 1000 miles on it.
    The same batteries can be put in homes to store a month of energy from an existing windmill, solar film etc.
    Big rigs will rung across the country on one charge.
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    I think you see what will happen.
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    AND AT THAT TIME ON THAT DAY OIL WILL FALL TO 20 DOLLARS A BARREL. 
    AND   –   Lets see you dream of the home 100 miles from the nearest road
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  • Peeka

    Its not only how many people are working, but also how much they are earning.  A 1000 retail clerk jobs is not the same as 1000 machinist jobs and the pay is not the same either.  The jobs report should come out with both the number of jobs and the total amount earned.
    This is important because the amount earned is a prediction of the amount of taxes collected to pay for schools, fire, police, roads, etc.

  • Flhxrider

    Smoke and mirrors by obama and his minions, anyone that believes this economy is better this month is a total moron.

  • Flhxrider

    Stay off the crack pipe bro.

  • Tameekas

    i gots 9 kids donts needs noos jobs we need a rase is my benfits cecks and a sale pone

  • Paul

    Lets talk about destroy the economy.  forget about politics for just a moment.  We do not have the money to support what we have created(both sides at fault)  we need to set spending back to a level  that can be met and freeze increases so we can get our economy backon the right track.  Hopefully you don’t spend like our politicians have in your personal life and neither should they!