The 120,000 increase in US employment in November suggests job creation is getting stronger. A sharp drop in the unemployment rate to 8.6 per cent adds to the impression. But it also conceals a bifurcation: those without jobs are either getting them or giving up. With pundits pointing to unemployment as central to President Barack Obama’s re-election prospects, the fall in the jobless rate should please him. But the other implications aren’t so positive.
The monthly tally of new jobs wasn’t enough even to abs1orb the estimated increase in the workforce that comes from population growth.
But the private sector created 140,000 jobs, and revisions to September and October figures produced an additional 72,000. The combination adds up to healthy job growth. Some 50,000 positions were added in the retail sector, after seasonal adjustment, suggesting that retailers foresee an active holiday season.
When it comes to the unemployment rate, though, the picture isn’t so rosy. About half of the big 0.4 percentage point decline resulted from 315,000 people leaving the workforce. The workforce participation rate, which peaked at 67.3 per cent in March 2000 and 66.4 per cent in January 2007, fell another 0.2 points in November to 64 per cent. The ranks of the long-term jobless also increased to 43 per cent of those officially unemployed.
With unemployment declining at the same time as more people are giving up looking for work, there’s the potential for rapid shrinkage in the pool of available employees. That could bring worker shortages and wage inflation. Further, pervasive long-term unemployment, both inside and outside the official workforce, would bring social problems. And, any increase in unofficial, “off-the-books” work — while helpful for some of the long-term unemployed — wouldn’t bode well for the government’s tax receipts.
On current trends, the officially reported unemployment rate, arguably the most politically salient figure in the monthly jobs report, will continue declining. That’s probably good news for Obama’s campaign team.
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But unemployment is still high, and structural changes in the workforce are troubling.
If the president does win re-election, he will have to deal with some of the consequences.