Applications for jobless benefits for the week ending October 6th were the lowest since February 2008, according to the latest release from the Labor Department. Slowing down layoffs is a good sign that employers are not going into panic mode despite the uncertainties of the so-called fiscal cliff, tax changes, Europe, and China. Recent job creation numbers and the low level of layoffs both point to ongoing recovery in the U.S., albeit at a relatively mild pace. The input is consistent with our forecast of recovery in the US well into 2013.
Job creation is certainly needed, but the Federal Reserve Board is not likely to deliver on Dr. Bernanke’s stated goal of creating jobs through QE3. The president, no matter who he is, has no miracle “create jobs” button in the White House. Anything he can do will take time, and they have to be the right actions. Congress could act, but that generally takes even longer to produce any forward momentum. Plan on being stuck with the current stream of discouraging job numbers for a while.
A closer look at the unemployment/employment situation shows the numbers are not good, but perhaps not as bad as we might think. We have heard a lot about the Civilian Labor Force Participation Rate of 63.6% and how it is the lowest in decades. That is true. As a matter of perspective though, the average since the number was first generated in 1983 is 65.9%. The current Participation Rate mirrors early 1983; readers may remember that we had a steep and painful recession in the U.S. in 1982. The nation was on the road to recovery and economic health even while struggling with a low Civilian Labor Force Participation Rate. Early 1983 also saw the unemployment rate reach 11.4% while employment was below the year-ago level. Those figures make the current 7.6% unemployment rate and a 2.0% year-over-year increase in employment look good.
The point is that from a macroeconomic view the situation is painful but not dire. We have actually gone through worse and gone on to thrive as a nation and in business. I am convinced we can do it again. I realize the debt level of the U.S. is much different at this time, but that is not a problem that will prove disruptive for 2013 or likely for the next five or more years.
