Popular Economics Weekly
Economists are rubbing their eyes with the November jobs report. It seems stimulus spending works. Obama’s $830 Billion ARRA stimulus + the Federal Reserve’s QE efforts to hold down interest rates has now created almost 6 million jobs since the Great Recession, and in spite of Hurricane Sandy.
The plunge in November unemployment was good news in several sectors. Firstly, Hurricane Sandy didn’t have much of an effect. In fact, it will stimulate more job formation in the coming months during the reconstruction. We know this because it mostly affected the goods-producing sector, which posted a 22,000 drop in jobs after an 18,000 gain the prior month. In November, manufacturing jobs slipped 7,000, construction fell 20,000.
Had there been no Hurricane Sandy, payroll jobs would have increased more than 200,000—back up to early 2012 levels. Private service-providing jobs rose 169,000 in November after a 171,000 increase in October. For November, notable gains were in retail trade (up 53,000), professional & business services (up 43,000), and health care (up 20,000).
Secondly, the retail trade numbers are particularly encouraging as these jobs have risen 140,000 over the past three months, suggesting healthy holiday sales this year.
That is why consumers are spending more. Consumer credit is a very good indicator of spending and outstanding debt in September rose $11.4 billion, following August's very large revised gain of $18.4 billion. The non-revolving component, inclusive of the student loan category and auto sales, rose $14.3 billion in the month on top of August's $14.1 billion gain. Revolving credit, where credit card debt is tracked, actually fell, down $2.9 billion for the third decrease in four months.
Graph: Calculated Risk
And lastly, state and local governments are hiring again, a sign that lingering effects of the Great Recession might be over. Calculated Risk’s graph shows total state and government payroll employment since January 2007. State and local governments lost 129,000 jobs in 2009, 262,000 in 2010, and 230,000 in 2011. So far in 2012, state and local governments have actually added a few jobs, and state and local government employment increased by 4,000 in November.
We know that some of the lower unemployment rate was due to discouraged workers leaving the work force, and that is the tragedy of still timid efforts to stimulate job growth. It is a fact that almost any infrastructure stimulus spending, such as in President Obama’s original $4B budget offer, would not only create many more jobs, but more than pay for itself in added revenues.
Harlan Green © 2012