Yesterday on Meet the Press, host David Gregory confronted Obama campaign strategist David Axelrod with the grim reality of America’s employment picture, the still-high unemployment rate, and the fact that 315,000 people dropped out of the work force last month, asking “Do the new numbers change the way the president looks at the economy?”
Axelrod’s muddled reply: “We’ve never hung our hat on one number; and, obviously, we continue to have big challenges. But let’s recognize that we’ve created 2.9 million private sector jobs in the last 21 months.”
He’s right not to want to hang his hat on one number, “2.9 million” included. The fact is, new jobs are being added at a far lower rate than a decade ago, as the chart below shows. And it’s that tepid job growth that explains America’s unacceptably high unemployment rate. (continued below chart)
In their new paper, “Heritage Employment Report: November Jobs Not Quite a Feast,” James Sherk and Rea Hederman, Jr. explain why the unemployment numbers remain bleak:
One thing is conspicuously missing from this November report—signs of a significant increase in business hiring and labor demand. The Bureau of Labor Statistics recently reported that job losses hit a 19-year low in the first quarter of 2011. Businesses are eliminating fewer positions today than at any point in the past two decades. Unemployment remains high not because of layoffs, but because job creation has barely improved since the recession ended in 2009. Fewer businesses are expanding, and fewer entrepreneurs are starting new enterprises. The lack of job creation explains the weak labor market.
This report shows few signs that this has changed. Employers usually increase hours at work and hire temporary workers before hiring new permanent employees. If hiring had picked up, the report should show rising hours at work and substantial growth in temporary help services. It does not. The length of the average workweek was unchanged in November at 34.3 hours, and the increase in temporary help services (22,300) was small. Average hourly earnings dropped $0.02 to $23.18.
Further, the huge drop in labor force participation explains almost all of the decrease in the unemployment rate. If the labor force participation rate had remained constant at 64.2 percent, then the unemployment rate would have been 8.9 percent—a statistically insignificant decrease of just 0.1 percent. The average duration of unemployment also rose to a new high of 40.9 weeks. The data show few signs that new hiring has significantly increased.