Last month the unemployment rate dipped below the
eight percent mark for the first in 2012 - much to the delight of media pundits
and President Obama's Administration.
We can all agree that the most important fix for our economy is more
jobs and that meaningful declines in the unemployment rate are comforting
proxies. However, the unemployment rate can be misleading when viewed in the
abstract. A closer look at the employment report paints a very different
picture and begs the questions - how bad do things need to get before economic
development becomes a priority in this country?
The headline figures from last month's September
Employment Situation Report were a 0.3 percent drop in unemployment and a 7.8
percent unemployment rate; I would offer a different set of numbers that paint
a dissimilar picture. The number
of persons not in the labor force increased
3.1 percent year-over-year last month.
The number of persons not in the labor force who want a job increased 8.4 percent year-over-year,
and the participation rate has sustained
decade lows in every month of this year, including September.
Before we jump the gun again in looking at October's
job market, we have to get to the bottom of these numbers. When you take a closer look at more
inclusive estimates, it is clear that our economy still needs to generate more
On Friday, November 2, 2012,
the Bureau of Labor Statistics will release the much-anticipated Employment
Situation Report detailing October's job numbers. Last month's report brought
claims that a considerable recovery was finally underway with the unemployment
rate dropping below eight percent, but more inclusive estimates paint a
different picture and encompass some of the lasting effects of the recession.
Moreover, forecasts predict
that the economy will only add around 125,000 new jobs, which barely keeps up with the number of new entrants added to
workforce population every month. The ADP Employment Report did show the
job market performing better than expected, but only reported minimal declines
in jobless claims at about one percent. Notably, job cut announcements jumped
41 percent in October to the highest level in five months.
participation rates and the exit of disenchanted workers from the labor force
have helped to push down the unemployment rate, perhaps even to deceivingly low
The participation rate has
been at the lowest levels seen in over a decade in the past three years and has
continued to decline to lower rates all year. The participation rate has remained at 63 percent throughout
2012, compared to six years of rates above 66 percent from 2002 to 2006.
Even though the unemployment
rate was 9.1 percent in September last year, the number of persons who have
left the labor force, but still want a job grew by nearly ten percent, and the
population outside of the labor force has grown more than three percent in the
Both President Obama and
Republican Nominee Romney have plans to address the lingering jobs
deficit. Romney's plan calls for
tax reform and tax cuts, in addition to reduced government spending and
regulation. Romney's plan also includes efforts to retain American workers and
solidify their education and workplace skills. President Obama's economic
recovery plan includes eliminating tax breaks for companies that outsource
jobs, maintaining new financial regulations, and tax increases for the top tax
bracket. President Obama has also put forth a budget-balancing plan that
includes investments in education, manufacturing and infrastructure.
I would urge both candidates
to also revisit one of the unsung heroes of the U.S. economy - the housing
market. Despite the minimal coverage
the housing market has received in this election, the Bipartisan Policy Center
estimates that a housing market simply operating at historical averages could
double the U.S. economic growth rate and create nearly three million jobs.
The point being - jobs solve
a lot of problems, and economic development can start with housing policies
that stimulate new construction which has been nonexistent over the past four
plus years. New construction can, and has, contribute five percent to the gross
domestic product (GDP). All in all, housing related goods and services have
historically contributed between 15 to 20 percent of GDP, but it is
substantially off those historical averages. Remember there are over 300
million people in the U.S. and most of them prefer to sleep indoors. Construction and housing policy starts
with policies for shelter, rent, owner-occupied, and special needs. What are we