December Unemployment Report Sets Record

Financial FAQs

Friday’s Labor Dept. nonfarm payrolls report has just set a record for annual job creation. The U.S. added 252,000 new jobs in December to extend the strongest streak of hiring since the mid-1990s, but wages fell and more people dropped out of the labor force to slightly tarnish an otherwise excellent employment report.

Graph: WSJ

The economy has added at least 200,000 jobs for 11 straight months, the longest streak in almost 20 years. In 2014, the U.S. created 2.95 million new jobs to mark the largest gain since a 3.18 million increase in 1999.

In December, President Obama noted that the economy had created 10.9 million jobs over the past 57 months. The number is now 11.2 million with December added in plus an additional 50,000 jobs added to the past 2 months. This streak of growth is improving the net job creation over which Mr. Obama has presided, which now puts him in fourth place among the last 10 presidents in terms of job creation.

Graph: WSJ

The economy has 6.1 million more jobs today than when Mr. Obama took office in January of 2009. That puts his total job creation ahead of presidents John Kennedy, Gerald Ford, and George H.W. Bush, who each served one term or less. It also puts him well ahead of President George W. Bush, whose final year in office also comprised the beginning to the longest and deepest recession since the Great Depression.

The nation’s unemployment rate also continued to tumble, falling to 5.6 percent from 5.8 percent and hitting the lowest level since June 2008, the Labor Department said Friday. The fall in the jobless rate stemmed partly from the increase in the number of people working, but more Americans also dropped out of the labor force. As a result, the percentage of working-age Americans 16 or older fell again to match a postrecession low of 62.7 percent — a level last seen in 1978.

That may be why wages aren’t rising above 2 percent annually, when 3 to 4 percent annual wage increases are the norm during economic recoveries. Wage gains have ranged from 1.7 percent to 2.1 percent since 2010, just two-third as fast as they normally grow. Economists predict a tightening labor market will spur higher wages but so far earnings haven’t budged much.

Graph: WSJ

And Chicago Fed President Charles Evans has speculated that the Fed won’t have to raise interest rates until 2016, if inflation doesn’t pick up to the 2 percent target of stated Fed policy.

Private payrolls increased 240,000 after rising 345,000 in November. Goods-producing jobs jumped in December, led by construction which advanced 67,000 in December after a 20,000 increase the month before. Manufacturing employment increased 17,000, following a jump of 29,000 in November. Mining rose 3,000 in December, following a 1,000 boost the prior month.

Private service-providing jobs gained 173,000 after a 294,000 jump in October. The latest increase was led by professional & business services. Government jobs increased 12,000 after rising 8,000 in November.

Harlan Green © 2014

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Where is Harry Truman When We Need Him?

Popular Economics Weekly

The U.S. economic outlook has "clearly" deteriorated this year, and the continued softness of economic indicators shows that the headwinds facing the country are even stronger than thought, Chicago Federal Reserve President Charles Evans said last Wednesday.

"Conditions still aren't much different from an economy still in recession," said Evans, speaking at a seminar in London.

Is there something we can do about it with our Accommodator-in-Chief giving conservatives what they want, such as cancelling the new air quality regulations, without negotiating for something in return? Well yes. Bring back another “Give ‘em hell” Harry Truman, or have President Obama choose him as a model for how to weather the next year during an election season, instead of the “Give ‘em what they want” Barack we have known of late.

“Give ‘em hell” Truman was given that nickname for a reason. During a 1948 campaign speech a supporter yelled out "Give 'em Hell, Harry!". Truman replied, "I don't give them Hell. I just tell the truth about them and they think it's Hell."

The post-WWII economy was going through the same malaise as today. Federal debt had ballooned to 120 percent of GDP to pay for WWII (vs. 80 percent today), unemployment was high, and Republicans crying deficit reduction had triumphed in the 1946 Congress.

"Republicans stand four-square for the American home--but not for housing,” he said during his 1948 campaign. “They are strong for labor--but they are stronger for restricting labor's rights. They favor minimum wage--the smaller the minimum wage the better. They endorse educational opportunity for all--but they won't spend money for teachers or for schools. They think modern medical care and hospitals are fine--for people who can afford them. They consider electrical power a great blessing--but only when the private power companies get their rake-off. They think the American standard of living is a fine thing--so long as it doesn't spread to all the people. And they admire the Government of the United States so much that they would like to buy it."

Does all this sound terribly familiar, even to the Republican attacks against him?

“The smear campaign on your President started in all its vile and untruthfully slanted headlines, columns, and editorials,” said Truman. “Hearst’s character assassins, McCormick-Patterson saboteurs all began firing at me, as did the conservative columnists and radio commentators. Not because they believed anything they said or wrote, but because they were paid to do it.”

Truman was following one of FDR’s more well-known maxims: “Human kindness has never weakened the stamina or softened the fiber of a free people. A nation does not have to be cruel to be tough.” Truman and the Democrats were alone in trying to keep the U.S. economy afloat, in other words. So instead of compromising with deficit hawks by cutting spending, he blasted the “do nothing 80^th Congress of that time”, advocating Universal Health Care and extension of unemployment benefits. When the deficit hawks in Congress voted down those benefits—both ‘blue dog’ Democrats and Republicans, we might add—he was able to blame them for the continuing malaise. Then he upset heavily favored New York Governor Thomas Dewey in 1948—it was one of the most famous comebacks in Presidential history.

“I have told the people that there is just one big issue in this campaign and that’s the people against the special interests. The Republicans stand for special interests, and they always have. The Democratic Party, which I now head, stands for the people–and always has stood for the people.”

Why is this malaise dragging on so long? With some $2 trillion in cash sitting on S&P 500 corporations’ balance sheets, and profit margins the highest since WWII, employers are refusing to hire more workers. This is why there was zero (0) nonfarm payroll growth in August.

It’s because businesses have been living in a bubble they are reluctant to leave. It is called supply-side economics, because of a succession of business-friendly administrations that believed the bulk of government benefits should be directed to business, rather than consumers. This was mainly in the form of tax breaks, which are of little benefit to consumers—most of whom pay a payroll tax that has never been cut. Business tax breaks are an indirect form of government support, but nevertheless result in reduced revenues.

Yet consumers have been spending more as wages and salaries—80 percent of the workforce—are rising; have been rising in fact since July 2009, the nominal end of the Great Recession. Consumer spending rebounded a sharp 0.8 percent after slipping 0.1 percent in June.   By components, durables jumped 1.9 percent after declining 1.1 percent in June.  Clearly, motor vehicle sales are up as the supply constraint related parts shortages from Japan is easing.

So what is the lesson from “give ‘em hell, Harry”? Truman was not afraid to take on those who wanted to reduce government, when government was the only support for both businesses and consumers during tough times.

“People are waking up that the tide is beginning to roll, and I am here to tell you that if you do your duty as citizens of the greatest Republic the sun has ever shone on, we will have a Government that will be for your interests, that will be for peace in the world, and for the welfare of all the people, and not just a few.”

So the Obama the Accommodator has to turn into Obama the fearless Negotiator who is willing to attack his enemies, who are also the enemies of the majority who have been hurt most by the Great Recession.

Harlan Green © 2010