U.S. job creation steady for now, but slow

December 3, 2010

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The November unemployment report showed that U.S. job creation is steady for now, but too slow to lower the unemployment rate. Job creation was weaker than prognosticators expected, but that was partly because of pre-holiday cautiousness in the retail sector. With no new fiscal stimulus, modest job creation is likely to continue — provided monetary largesse doesn’t undermine it.

Two factors made the feeble 39,000 jobs created last month a less dire statistic than it seems. First, September and October jobs were revised higher by a total of 38,000. Upward revisions have been the norm in recent months, and the same could happen to November’s figure.

Second, while seasonally adjusted retail sector employment declined, in absolute terms retail employment increased by 300,000 from November 2009. Retailers, like schools back in September, may simply be hiring less aggressively than in some of the prior years that shape the seasonal adjustment. That would hardly be surprising given the economy’s recent trajectory.

Yet even if it’s not as bad as it looks, the overall trend is still unattractive. The creation this year of an average of 86,000 jobs per month is insufficient to bring down the dangerously high rate of unemployment. Long-term unemployment and the number of discouraged workers are still on the increase. So November’s uptick in the headline unemployment rate to 9.8 percent may better reflect reality than the decline from 10.1 percent in October 2009 to 9.5 percent in June 2010.

The atypically weak job creation as the U.S. economy puts recession behind it could well be related to the fiscal and monetary policies recently pursued. While net fiscal stimulus has lessened, with lower deficits than the previous year in every month since May, exceptional monetary stimulus continues.

This is unlikely to have much positive impact on job creation; instead, a continuing surge in commodity prices stoked by cheap money could stifle economic growth and thereby slow job creation. Unfortunately, for the long-term unemployed there is little Christmas cheer.

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