The latest data from the US Labor department, on December employment changes, was a very disappointing start to the new year. Disappointing, but not surprising for those who follow this blog, which has long been saying that the US and world economies are in for an extended period of disappointing performance (see “It’s Worse than you think”).
The report was in fact not just gloomy or bad but godawful (although seasonal adjustments and severe weather may have impacted the numbers.) Here are the guts of the report:
Net jobs created: 74,000, the worst monthly performance in years. Moreover, 40,400 of those were in temporary services. Another 55,300 jobs were in retail, many of which were in seasonal hires. So of the 95,700 new jobs in the survey, half or more may disappear come January. All other sectors (government, professions, construction, manufacturing, etc.) had a net loss of 21,700 jobs in December (merry Christmas!), making up the net total.
Job market participation: This is the big news. In a good job market, participation in work and the search for work should be picking up. However, in December 347,000 workers dropped out of the labor force; they gave up work and looking for work altogether. This brings the percentage of working-age adults who are active in the labor market to a new low for this recession, to 62.8%. Yes, the workforce is still contracting, years after the recession is supposed to be “over.” The overall 62.8% rate is the lowest since 1978; that is 35 years ago. For men, the news is even worse — their labor force participation rate is the lowest since 1948.
What does it mean that the incomes of the top 1% keep rising, and corporate profits are setting records, while nearly FORTY PERCENT of the workforce does not find it worthwhile to be working or even looking for work? Clearly the disconnect between Wall Street and Main Street, or between company success and workers’ opportunities, has grown into a vast chasm.
If the invisible hand of the market is supposed to create a connection between company success and demand for jobs, that hand needs to be slapped as it is clearly not doing its job. There is no easy solution for this problem, but it is clear that as we have moved from a manufacturing economy to a service economy, jobs will only be created when the average worker can afford to demand a host of services — medical, educational, recreational, personal — that need people to carry them out.
So let’s hope Obamacare, by providing more people with health insurance, boosts the demand for labor in that field. Let’s hope an increase in the minimum wage boosts buying power throughout the economy creating a demand for services. And let’s hope that people in Congress get the message — what is good for American companies and their executives and stockholders is clearly no longer good for the American worker.