All the ducks lined up in a row in this morning’s November employment report, making for what appears to be a strong labor market. The economy added 211,000 jobs. The employment level rose by 244,000 and the labor force grew by 273,000. (Funny how the labor force grows only during months with good employment numbers and shrinks during the lean months, keeping the unemployment rate stable.) To hear economists tell it, the economy is doing great. Even the Federal Reserve has begun to sip the Kool-Aid, licking its chops at the prospect of jacking up interest rates next month.
Yup, things look pretty rosy, as long as you don’t back up and look at all of this from a longer-term perspective. For example, consider per capita employment. It rose again and now hovers at a post-recession high. Just don’t compare it to the pre-recession high. Look at this chart: Per Capita Employment. Our “new normal” high is 2%, or about six million workers, lower than it was before the recession. This is corroborated by a chart of unemployed Americans: Unemployed Americans. This figure is up by 7.1 million workers. If you’re one of them, you don’t need me to tell you that you’ve been written off.
I’ll admit to being surprised that the economy has continued to rebound as well as it has, though that’s not saying much. It’s basically riding three sectors – health care, housing and retail. Housing has been strong thanks in large part to all-cash speculators, since mortgage applications have been rather weak. This won’t last. And health care has been strong thanks to the Affordable Care Act, unleashing millions of new and long-neglected patients onto the market. And the retail sector is, I suspect, a case of sales being pulled forward by sub-prime auto lending, low oil prices and pre-holiday sales. It’s just a matter of time before all of this unwinds, as trade deficits that exceed federal deficit spending continue to drain money from the economy and as population growth continues to crowd out per capita consumption.
Nevertheless, the Federal Reserve sees this as a good time to shoot a hole in the boat. I think it’ll be sorry.