T he White House argues that:
“Today’s employment report provides further evidence that the economy is continuing to heal from the worst economic downturn since the Great Depression, but the pace of improvement is still not fast enough given the large job losses from the recession that began in December 2007.”
But the economy might be doing worse than healing too slowly… it might not really be healing at all. The report referenced by the White House is the Bureau of Labor Statistics’ Employment Situation Summary, which says in its latest findings:
The unemployment rate fell by 0.4 percentage point to 8.6 percent in November, and nonfarm payroll employment rose by 120,000, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in retail trade, leisure and hospitality, professional and business services, and health care. Government employment continued to trend down.
Household Survey Data
In November, the unemployment rate declined by 0.4 percentage point to 8.6 percent. From April through October, the rate held in a narrow range from 9.0 to 9.2 percent. The number of unemployed persons, at 13.3 million, was down by 594,000 in November. The labor force, which is the sum of the unemployed and employed, was down by a little more than half that amount.
But as CNBC reports:
Job creation remained weak in the U.S. during November, with just 120,000 new positions created, though the unemployment rate slid to 8.6 percent, a government report showed Friday.
The rate fell from the previous month’s 9.0 percent, a move which in part reflected a drop in those looking for jobs. The participation rate dropped to 64 percent, from 64.2 percent in October, representing 315,000 fewer job-seekers…
However, economists were treating the [unemployment] rate drops with skepticism.
“When the unemployment rate declines, we want to see both employment and participation increase as discouraged workers return to the labor force. Today, we got the former, but not the latter, making the 0.4 percent drop look a bit suspect,” Neil Dutta, US economist at Bank of America Merrill Lynch, told clients. “We would not be surprised to see the unemployment rate give back some of its decline in the coming month(s).”
They’re saying the same thing over at ZeroHedge:
“And for those wondering how it is possible to have such a major drop in the unemployment rate, here it is: Labor Force Participation down from 64.2% to 64.0% as ever more people leave the work force once again.”
And zooming out for a minute, remember that employment is not a good metric for whether an economy is actually on a path to long term growth. The White House says “the economy is healing,” just not fast enough, but full employment is a secondary effect of a robust economy, not its cause and fluctuations in the employment rate are not a reliable measure of how well the economy is doing. They tell use more about what has happened already than what is going to happen.
Instead we should ask: Are people saving? Are people investing wisely? Is capital seeking out its most productive uses? Are market distortions siphoning it off and destroying it in less productive applications? The answers are no, no, no, and yes. People are continuing to spend money they don’t have on consumption goods they don’t need. We’re borrowing, not saving. We’re consuming, not investing. We’re wasting, not producing. Without a deep, fundamental, revolutionary change in our economic paradigm and mindset, we are on the road to economic ruin, and these meaningless job reports are a comforting distraction.