December Employment: Another New Normal Number

The employment report for the month of December, 2011, released this morning by the Bureau of Labor Statistics, sounds good on the surface.  The economy added 200,000 jobs in December and the unemployment rate fell by another tenth to 8.5%.  But, when taken in context, rather than a sign of brighter days ahead, the report is merely further evidence of an economy mired in the “new normal” state of high unemployment.  Consider the following:

  • The number of unemployed Americans remained above 18 million for the 19th consecutive month.  (The worst level was 18.98 million, reached in July of last year.)  Here’s a chart:  Unemployed Americans
  • The employment level improved for the sixth consecutive month to 140.79 million.  But the improvement is painfully slow and remains below the employment level when Obama took office in January, 2009.  Since bottoming out in December, 2009, it has risen by 2%.  But the U.S. population has risen by 1.5% during the same time frame.  So there’s been very little improvement in real terms since the depth of the recession.  Here’s the chart:  Labor Force & Employment Level
  • Per capita employment improved for the fifth month in a row but, once again, each improvement has been infinitesimal.  It remains only 0.6% above the lowest level of the recession.  Here’s the chart:  Per Capita Employment
  • The gap between my calculation of unemployment, which assumes that the labor force grows at the same rate as the population, and the government’s official “U3” calculation, is just a whisker below the record level reached in July, and the gap grew in December for the 4th consecutive month.  What this means is that all of the improvement in the labor picture that the media has been celebrating lately is a mirage created by dropping people from the labor force.  Here’s a chart of the BLS unemployment rates – U3 and U6 – vs. my more realistic versions:  Unemployment Chart

I believe we’ll see the labor picture darken again in months ahead as cuts in federal spending begin to bite, along with deterioration in Europe’s economy as austerity measures there send Europe into recession. 

* * * * *

Here’s a breakdown of those 200,000 jobs, taken from the establishment survey portion of the employment report:

  • transportation and warehousing:  + 50,000 (42,000 alone was in the couriers and messengers industries.  Not surprising for the holiday season, and not likely to last.)
  • Retail trade:  + 28,000 (again, not surprising for the holiday season, and not likely to last.)
  • Leisure & hospitality:  + 24,000
  • Manufacturing:  + 23,000
  • Health care:  + 23,000 (continuing expansion of the health care industry bubble that has to pop, sooner or later, with cuts in federal spending on health care.)
  • Mining:  + 7,000
  • Construction:  no change
  • Government:  no change (a surprise, since this has been declining steadily and is expected to continue declining)
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