It’s a tough day to ask for your prediction for the new year. December saw only 74,000 jobs added to U.S. payrolls, far below what is needed merely to keep up with the natural growth of the labor force (around 125,000). Worse, it brought the average monthly growth for the year to 182,000 vs. 183,000 in 2012.
In other words, the anticipated recovery in jobs isn’t happening. At the rate of the past three months — 172,000 — it would take almost six years for the labor market to recover to its pre-recession levels. Also, half of the December gain came in temp jobs.
Much of the media will focus on the unemployment rate dropping to 6.7 percent from 7 percent. This is actually not good news because it is not happening because of job growth. Labor-force participation is at its lowest level in 35 years and the share of the working-age population with a job didn’t increase. According to the Economic Policy Institute, if these people had been included the unemployment rate would be 10.2 percent.
As for this year, the famously bearish Dr. Doom, Nouriel Roubini, argues that growth will pick up, at least modestly. Nobel laureate Joseph Stiglitz takes the opposite view: “The great malaise drags on.” I say, as long as federal austerity continues, we can’t hope to dig out of the demand hole left by the Great Recession.
What say you?
This Week’s Links:
• Boeing goes to pieces | The American Conservative
• Why presidents stopped talking about poverty | The New Yorker
• The loopholes in the Volcker rule | Forbes
• Five economic reforms millennials should be fighting for | Rolling Stone
• My lesson from the crisis | Lawrence Summers
• Secular stagnation, green shoots or what? | Naked Capitalism
Today’s Econ Haiku:
It’s the new normal
Slow jobs growth, falling incomes