While the U.S. economy added 120,000 net new jobs in November and the nation’s unemployment rate fell dramatically, to 8.6 percent, those figures don’t tell the whole story, according to one Washington economist.
The seemingly robust job creation numbers that the federal government released Friday in its monthly employment data still aren’t enough to sustain a real drop in unemployment. Also, the economy would have added another 20,000 jobs in November except that many government workers were laid off — mostly from local governments.
Indeed, the rosy-looking drop in the national unemployment rate isn’t in reality good news at all, says Chad Stone, chief economist at the Center for Budget and Policy Priorities (CBPP), an independent think tank.
“The drop in the unemployment rate to 8.6 percent arises from people leaving the labor force, not from a fundamental improvement in job prospects,” he says.
The labor force shrank by 315,000 people in November, accounting for a substantial share of the decline in the number of unemployed, Stone says.
The economy remains sluggish and “calls for aggressive federal action,” he says.
Congress must renew the emergency unemployment insurance benefits and payroll tax cut that are set to expire at the end of this year, Stone says. Those extensions are caught in Republican obstructionism, however.
Enacting President Obama’s American Jobs Act would be useful because its proposals would boost economic growth and employment significantly in 2012 and 2013, Stone says.
But the economic stimulus with the biggest “bang-for-the buck” would be an extension of unemployment benefits for the nation’s jobless, he adds.
“Letting federal emergency unemployment benefits expire at the end of this year would not only be cruel to unemployed workers and their families, but would also weaken the recovery by reducing their capacity to buy goods and services in an economy that is already suffering from weak aggregate demand,” Stone says.
It remains very difficult to find a job.
The Labor Department’s most comprehensive alternative unemployment rate measure -— which includes people who want to work but are discouraged from looking and people working part time because they can’t find full-time jobs —- was 15.6 percent in November, down only modestly from its all-time high of 17.4 percent in October 2009 in data that go back to 1994, according to Stone. By that measure, over 24 million people are unemployed or underemployed.
More than two-fifths (43 percent) of the 13.3 million people who are unemployed -— 5.7 million people —- have been looking for work for 27 weeks or longer, he says. These long-term unemployed represent 3.7 percent of the labor force. Prior to this recession, the previous highs for these statistics over the past six decades were 26 percent and 2.6 percent, respectively, in June 1983.
“Ideally, Congress would enact a program like the President’s to give the economic recovery an additional boost and increase the likelihood that we can start to see the sustained job growth of 200,000 to 300,000 jobs or more a month to make real progress in reducing the unemployment rate,” Stone says. “At a minimum, lawmakers must not hobble the recovery further by letting the $150 billion of purchasing power –- roughly 1 percent of GDP -– represented by the payroll tax cut and emergency unemployment insurance disappear from households’ budgets, which will occur if they do not renew those programs.
The Obama administration made the same argument Friday.
“”Personal income and consumer spending are both up. Americans are showing more confidence in the economy. Now it’s incumbent upon Washington to give them confidence in our government to solve our biggest challenges and put millions of Americans back to work. This is a strong report, but we can’t forget those Americans who lost their jobs during the recession and are still struggling.
“We know what has worked: extending payroll tax cuts and unemployment insurance, and making smart investments in our economy. The clock is ticking,” says Labor Secretary Hilda Solis. “If Congress doesn’t extend emergency unemployment benefits for our long-term unemployed this month, 5 million Americans will lose their benefits next year. These are the everyday heroes of our recovery who have lost their jobs through no fault of their own. They spend all day, every day filling out applications, sending out resumes and looking for work. Now is not the time to turn our backs on them. They deserve better. They deserve action.
“Congress must act immediately to extend emergency unemployment benefits and payroll tax relief,” Solis adds. “We must pass these measures this month to continue the positive trends we’re seeing in today’s report.”
Scott Nance is the editor and publisher of the news site The Washington Current. He has covered Congress and the federal government for more than a decade.