JOBS | U.S. Boom Amidst Global Gloom

U.S. Job Growth Higher in December,
Unemployment still 5%. But will weak
 demand from overseas be exacerbated
 by a stronger dollar?

The just-released BLS jobs report for December [link is to the BLS News Release] shows payrolls rose by 292,000 in December. The good news will be much appreciated as Asia and Europe suffer from slack demand and pessimism.

Upward revisions for October and November reinforced the labor market strength in December, producing an average growth of 284,000 over the last three months, up from an average of 221,000 per month for the full year 2015.

Economists Underestimated December Growth. A Reuters survey of economists released an hour before the BLS data showed an average expected growth figure of approximately 200,000 new jobs.

With the upward revisions in the prior two months, that number was way off. Reuters should probably stop publishing predictions that will be contradicted within an hour. (How useful are they, really? To users and to those involved in the exercise?)

The U.S. "Misery Index" Is a Tiny 5.4 percent. We should be so happy. The unemployment rate in December was 5.0 percent for the third month in a row as inflation remains low– the November Consumer Price Index for all Urban Consumers (CPI-U) rose only 0.4 percentage point, seasonally adjusted, compared with November 2014.

Industry Detail. Professional and business services added 73,000 jobs in December, with nearly half the gain from growth in temporary help services, which rose 34,000. In 2015, employment in professional and business services increased by an average of 50,000 per month, not much below the 59,000-a-month figure in the strong year 2014.

Construction showed strong job growth for the third consecutive month. Health care also continued to add jobs in December and showed an even stronger year in 2015 than the year before. Employment in food services and drinking places increased by 37,000 in December, another bright spot.

Motion picture and sound recording industries added 15,000 jobs in December, offsetting a decline
in the previous month. Employment rose among couriers and messengers. Other sectors changed little.

Labor Market. Among people who were neither working nor looking for work in December, 1.8 million were classified as marginally attached to the labor force, down from 2.3 million a year earlier. The number of discouraged workers, a subset of the "marginally attached" who believed that no jobs were available for them, was 663,000 in December, little different from a year earlier.

The labor force participation rate, at 62.6 percent, has shown little change in recent months. The employment-population ratio, at 59.5 percent, has also changed little. The BLS has published a little noted article in December by Steven F. Hipple on the drop in the U.S. labor force participation rate since 2000. BLS counts people who are neither working nor looking for work as “not in the labor force.”  From 2004 to 2014, the percentage of such people has increased, reducing the labor force participation rate. Data from the Current Population Survey (CPS) and its Annual Social and Economic Supplement (ASEC) provide some insight into why people are not in the labor force. In the ASEC, people who did not work at all in the previous year are asked to give the main reason they did not work.

Interviewers categorize survey participants’ verbatim responses into the following six categories:

• ill health or disabled; 
• retired; 
• home responsibilities; 
• going to school;
• could not find work; and 
• other reasons. 

A quick summary of Hipple's article is: Between 2004 and 2014, all of these factors came into play, and a single factor goes a long way toward explaining what is happening–the aging of the work force. More workers are becoming disabled or retiring, at the same time as workers withdrawing from the labor force continue to cite the other reasons.

LABOR | Dan Coats Opines on Low Participation

Although unemployment has fallen, the civilian labor force participation
rate has not yet recovered. Chart of BLS data by the St. Louis Fed.

In October last year I posted here something on the decline in labor force participation. It had more than 1,000 page views and I added two follow-up posts.

Last week the Joint Economic Committee of the Congress held a hearing on the subject.

Sen. Dan Coats (R-Ind.), chairman of the JEC, yesterday wrote in the Washington Times about possible explanations of the decline in labor force participation, based on the hearing:

• Baby boomers retiring? He notes that while Americans are living longer, which means more retirees, the participation rate for older workers has been rising. (One reason is that the age for pickup of Social Security has been rising along with longevity.)
• Younger people entering the workforce later? Yes, he says that more young people are delaying the start of the working careers by remaining full-time students.

Coats adds other explanations that persuade him:

• Unexpectedly slow recovery from the deep financial crisis of 2007-08, and the difficulty that  laid-off workers have had in re-entering the workforce. 
• Federal disability programs, described as a "shadow unemployment program", because they reduce incentives to look for work.
• A rising number of single-parent families, where the head of household has difficulty holding down a job at the same time as looking after children.

Other explanations are offered in my three prior posts. The latest data suggest a possible bottoming-out of the rate.

JOBS | Which David Brooks Should We Listen To?

David Brooks tackles every problem with earnestness and when he figures out the answer he expresses his dismay, often enough that Congress doesn't get it or hasn't acted.

In his Op-Ed today, he is on to the low labor force participation rate, the "lowest in decades".

He has read another book and he is distraught at the options facing young people: "Millions are in part-time or low-wage jobs that don’t come close to fulfilling their capacities. Millions more are in dysfunctional or unhealthy workplaces, but they don’t feel they can leave."

Transcending his University of Chicago roots, he favors favors a crash program of infrastructure investment.

The federal government should borrow money at current interest rates to build infrastructure, including better bus networks so workers can get to distant jobs. The fact that the federal government has not passed major infrastructure legislation is mind-boggling...

He warns Congress that young people are watching.

[O]ver the past five years, the political class has done essentially nothing. That will fill future generations with astonishment and should fill the current generation with rage... 

It makes sense to me. Borrowing resources today is appropriate to pay for the infrastructure needs of the future, just so long as the projects themselves are worthwhile. This was President Obama's intent when he came into office in 2009, to use stimulus money to accelerate state and local "shovel-ready" projects.

But nearly two and a half years ago Brooks was distressed at our era of indebtedness. He was appalled that any generation would "borrow money from the future to spend on itself". His article pillories debt of all kinds - Federal, state, local, business, personal. The title of his Op-Ed piece is "The Debt Indulgence".

Mr. Brooks, you are a reasonable person and you are seriously trying to come up with answers to big problems. But if we borrow to create jobs for our young people, won't we just be indulging ourselves in more debt?