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The Jobs Report

The new jobs report showed much stronger than expected job growth in October, up 203,000 when the forecast had been 120,000. The job growth for September and August were also revised upwards, giving an average for the three months of over 200,000, which is the number economists think is needed to bring unemployment down in the long term (the drop in unemployment in recent months was mostly due to people dropping out of the job market).

The unemployment rate actually ticked up last month, however, to 7.3 percent, but that was due to counting temporarily laid-off federal workers because of the shutdown early in the month.

Markets immediately reflected the possibility that the Federal Reserve might now begin to scale back the stimulus. The yield on 10-year treasury bonds rose to 2.72 percent in early trading from last evening’s 2.60 percent. But it will take more than one month’s good news to induce the Fed to move more than slightly.

And the jobs report was by no means all good news. The participation rate (the percentage of working-age people in the labor force) continued to decline, now down to 62.8 percent from 63.2 last month. The unemployment rates for teenagers (22.2 percent) and blacks (13.1 percent) remain dismal. The rate for teenagers is likely to go up in the future, as several localities, such as the state of New Jersey, raised their minimum wages in the election on Tuesday. When the teenage (i.e. unskilled) unemployment rate is over 20 percent, increasing the price of unskilled labor is economic lunacy.

The broader measure of unemployment, which includes discouraged job seekers and those involuntarily working part time, increased last month from 13.6 percent to 13.8 percent. It is only when this rate begins to decline substantially month-over-month that we can say we are, finally, on the way up.



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