November’s slowing employment growth numbers released today show that government support is still needed to secure our nation’s increasingly fragile economic recovery and put the now 15.1 million unemployed Americans back to work. As government fiscal support for the economic recovery winds down and unemployment insurance benefits for the long-term unemployed lapse, these new numbers underscore the urgency for Congress not to withdraw fiscal support and to continue providing unemployment benefits to the long-term unemployed to sustain family incomes and secure the recovery. In the near term, policy priorities must focus on job creation, not deficit reduction.
The economy added just 39,000 jobs in November—a sharp decline from last month’s solid increase of 172,000 jobs. As a result of this slow jobs growth, the unemployment rate rose to 9.8 percent. The private sector led employment creation with 50,000 net new jobs, but also registered a sharp decline from the 160,000 private-sector jobs added in October. Although the private sector has added jobs for 11 straight months now, November’s number is the weakest private-sector job performance since January 2010. (see Figure 1)
Private-sector gains were led by an increase of nearly 40,000 temporary help jobs. Ordinarily, temporary hiring can be seen as a leading indicator of future permanent hiring. But today’s evidence of softening labor market conditions indicate that private employers may be in a holding pattern as they wait for better indication that economic recovery will continue in the right direction. Sadly, the primary obstacle to faster growth and job creation are the weak labor market conditions themselves. The Federal Reserve’s Beige Book indicates that private-sector hiring is being held back by the high and enduring unemployment, which creates uncertainty about prospects for business expansion in the near term.
The manufacturing sector lost 13,000 jobs in November despite the Federal Reserve’s so-called “quantitative easing”—efforts to stimulate the economy through monetary policy—which has helped boost the competitiveness of the dollar in global trade. The construction sector lost 5,000 jobs as property markets continue adjusting to the aftermath of the residential and commercial real estate bubbles. The retail trade sector lost more than 28,000 jobs, a harbinger of weakening consumer spending. Employers in no sector reported strong net hiring.
For much of the past two years, fiscal support for the creation of economic growth and employment through the American Recovery and Reinvestment Act of February 2009 and other policies buoyed private and public employment by providing tax incentives to business, investing in infrastructure development and green jobs, and preserving jobs for critical service providers in state and local government. The Recovery Act boosted real gross domestic product—the total output of our nation’s goods and services after accounting for inflation—by an estimated 3.4 percent, lowered the unemployment rate by 1.5 percentage points, and preserved or added as many as 3.7 million jobs to the economy through 2010.
But in November, this fiscal policy support for the economic recovery wound down, with less than 2 percent of the Recovery Act’s resources left “unobligated.” A big share of the Recovery Act money, however, is spent and gone, particularly funds to boost public-sector employment, which helped stabilize the labor market during the recovery. Now, though, the last 1,000 temporary jobs at the U.S. Census Bureau, which bolstered national employment through much of 2010, were eliminated from federal payrolls in November. Fiscal support also helped offset sharp public employment losses at the state and local government levels, too, as revenues have deteriorated with high unemployment, declining property values, and slower economic activity.
Then, in November, local governments cut 14,000 from their payrolls, including 4,200 teachers and other education professionals. (see Figure 2)
Continued weakness of the labor market can be seen in the household survey of the U.S. Department of Labor’s employment data. As unemployment crept up, the average duration of unemployment remained basically unchanged at just under 34 weeks. The share of those unemployed for 27 weeks or longer remained high at 41.9 percent, showing essentially no improvement since August 2010. Modest growth in payrolls offers little consolation to these long-term unemployed individuals, for 2 million of whom extended emergency unemployment insurance was cut off when Congress failed to authorize a continuation of benefits by November 30, 2010.
Fiscal support for unemployment insurance also provided critical support throughout the Great Recession and the tepid economic recovery that’s followed, adding an estimated 800,000 jobs and 0.8 percentage points of GDP to the U.S. economy. The Census Bureau reports that unemployment insurance kept 3.3 million people out of poverty in 2009. If the Congress does not continue funding long-term unemployment insurance, as many as 7 million unemployed people could lose coverage by the end of 2011.
What’s more, November’s employment report discredits the mistaken notion that high unemployment levels result from unemployment insurance benefits disincentivizing work. Rather, the labor market continues to operate with substantial slack. Average weekly hours in the private sector—an indicator of the strength of labor demand—was unchanged in November, and remains nearly 7 percent below pre-recession levels. Almost 9 million employed people were working part-time in November who would prefer to work full-time if labor market demand were sufficiently strong. A separate report from the Bureau of Labor Statistics showed that there were more than five job seekers for every job opening in September (the latest month for which data are available).
Ethnic minorities continued to bear disproportionately high and rising unemployment. The unemployment rate for African Americans rose 0.3 points to 16 percent, and the rate for Latinos rose 0.6 points to 13.2 percent. Although the unemployment rate for Asians was below the national level of 9.8 percent, Asian unemployment jumped up by 0.5 points in November to 7.6 percent (data for Asians are not seasonally adjusted). Since the Great Recession officially ended in June 2009, unemployment rates for African Americans and Latinos are up 1.2 and 0.9 percentage points respectively, compared to a 0.2 percentage point increase in unemployment for white people in the labor force.
Overall, the Department of Labor’s grim employment situation update signals the tenuous state of the economic recovery. The economy is still pointing in the right direction, but as the Obama administration and Congress debate budget policy, they must consider the imperative—in the near term—for continued support to advance economic growth and job creation.
Adam Hersh is an Economist at the Center for American Progress. See the Economy page on our website for more analysis and our recommendations on economic policy.