Friday, December 2, 2011

Mixed Employment News

Unemployment went down last month, to 8.6 percent.  The trouble is, it got that way by a statistical fluke.  Employment went up by 278,000.  That's good.  But the labor force went down by 315,000.  That's how you get the unemployment rate to drop by 0.4 percent in one month.

It's good news that the unemployment rate went down.  But at this stage of the recovery it would be better news if the unemployment rate went up.  Why?  Because in a healthy recovery you get people entering the labor force in their hundreds of thousands looking for work in lockstep with the people actually getting jobs in their hundreds of thousands.  For about a year, when the economy really starts to kick into forward gear, you can expect healthy job growth but no reduction in the unemployment rate.

The labor force has been essentially flat for the last four years.  By comparison, from 2002 to 2008 the labor force increased by 10 million.  Put it this way.  Absent the Great Recession the labor force should be about 4 million higher than it is right now.  It will take years of healthy job growth to fix that, and get back to the robust job market of the mid 2000s.  And that healthy job growth is only just getting started.

It is true, of course, that, with the housing crash, there was no way to get back to full employment in a couple of years.  But it is also true that the Obama administration has made things worse with its regulations, its ObamaCare, its spending splurge, and its green energy boondoggle.  The American people might have something to say about that next November.

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