The headline in the January employment report is that unemployment rate went down from 8.7% to 8.5% and the economy created 212,000 new jobs. But the real story is that the new jobs were created outside of just healthcare and temporary employment service. Most importantly, jobs were created in transportation and warehousing, manufacturing, construction, and retail trades. This is very significant because more than 75% of the six million jobs that have not been recovered since the recession are in construction, manufacturing and retail trades. Other observations:
- At the end of each year, the Labor Department makes an adjustment to the employment figures to account for seasonal variations. After the adjustment, the unemployment rate for December was 8.5%, which was a decrease from November of 8.7%.
What does it mean? The decrease in unemployment is significant because the decline in unemployment was caused by a growth in jobs, and not by people dropping out of the labor market.
- The economy created 212,000 jobs in December, 200,000 were in the private sector and the government cut 12,000 jobs
What does it mean? There are two things that are important regarding the number of jobs created. First, 23,000 jobs were in manufacturing, 27,900 were in retail trades, 17,000 were created in construction, and 50,200 were in transportation and warehousing. All of these are industries where a significant employment gap remained as a result of the recession. Second, the fact that the economy continues to create jobs at an accelerating pace indicates that a solid recovery is underway and the unemployment rate is likely to decrease significantly in the future.
My prediction once again regarding unemployment in 2012 is that the unemployment rate will decrease to 7.8% or lower by the end of the year for the following reasons:
- Corporations fixed investment has picked up significantly- they are hoarding cash less
- Small businesses plan to increase their hiring significantly, based on a national survey
- Employment is increasing in construction, manufacturing and retail trades- the hardest hit areas
- Consumers are beginning to spend more, because they are more confident.
One big issue that will still need to be addressed is the lingering high rate of unemployment among blacks. While white unemployment decreased from 7.3% to 7.1%, black unemployment increased from 15.5% to 15.8%. Of even greater concern, while blacks make up only 12% of the labor force, they now comprise 22% of all unemployed workers. Just as employment in construction and manufacturing has to be addressed for the labor market to become normal once again, so to will the problem of black unemployment.
Last modified: June 20, 2017