Jobs: Christmas Comes Early?

I held off commenting on yesterday’s weekly unemployment report, even though it was a generally positive one, because today we were to find out about the monthly unemployment rate.

Wise choice: the news was better than expected and, if continued, surely, marks a turning point.

The national unemployment rate fell from last month’s high point of 10.2% to 10.0%. Not much of a drop certainly, but it stops the steady rise we have been suffering. The rate of job losses also fell to a mere 11,000 in November the best performance for two years. Unfortunately that slight loss means we have now witnessed twenty-three straight months of job loss, during which time we have lost a cumulative 7.16 million jobs. It is this context that today represents such an important moment – perhaps the holidays have come early.

Yesterday we learned that new claims for unemployment insurance fell below the 500,000 mark for the first time for a long while as well.

Taking the data as a whole the picture is more encouraging than most people, including myself had imagined it would be. But before we get too carried away we should take pause: the number of long term unemployment is still rising and very high at 5.9 million or 38.3% of the total jobless. Taking the unemployed figure and combining with the ‘grey unemployment’ represented by discouraged workers we end up with a figure of 17.2% for a more comprehensive view of what the jobless situation is.

So we must take the balanced view and keep our enthusiasm for the drop in the overall unemployment rate in perspective.

Let me make two points:

1. One month is not a trend. The decline in unemployment in November has to be backed up over the next few months as well. The key question we need to ask, and answer, is how quickly will the job market generate enough jobs to absorb that huge increase in long term unemployed workers, and to re-absorb all those five plus million people who have lost their jobs in this horrible down cycle. All the signs indicate a long slow, and difficult, improvement. I think we can congratulate ourselves if we see the unemployment rate much below 8.0% this time next year.
2. The drag on consumption, consumer sentiment, and thus the economy that unemployment represents will thus continue well into 2010, and possibly well into 2011 as well. The cost in human terms – diminished skills as well as lost incomes – is piling up and effectively reducing our future potential. The sooner that we create sufficient jobs the better. I continue to think that policy initiatives, let’s not call them stimulus for fear of spooking the opposition, should be a priority.

With that in mind Obama has called a large group of ‘leaders’ together to discuss potential actions we can take to get the economy generating jobs. Not a moment too soon. I am always skeptical of such gatherings – I see them as attempts to create the illusion of action and thus as attempts to distract from prior inaction. At no time since this crisis began has the unemployment problem been a minor one. It should have been up front and center throughout. That we are only now getting around to a discussion about what to do seems a little tardy to me.

Better late than sorry.

Meanwhile let’s all take some holiday cheer from today’s news and the very first signs of an improvement in the job market.