The November job numbers tell us a number of things:
1. A drop to 7 percent unemployment and 203,000 jobs added is extremely positive news, suggesting there is something to be said for benign neglect. Without a stimulus, a new tax plan and or even a budget deal, we had the best month in quite a long time. The economy, if left largely alone, is very resilient.
2. I agree with my colleague Greg Sargent that this shouldn’t lead to a cutoff in unemployment benefits. Seven percent is still a lot of unemployed people, and the number of long-term unemployed is still historically high. Conservative Doug Holtz-Eakin of the American Action Forum says via e-mail, “The unemployed are increasingly the long-term unemployed — the hardest policy problem to solve. In addition, memories are short — 200,000 jobs should not be a cause for celebration. At this pace, it will take another 19 months to get the unemployment rate down from 7.0 to 6.0 percent.” In exchange for extending unemployment benefits, Democrats should look at GOP ideas for consolidating and reforming work training programs.
3. The stratification in unemployment rates among college graduates (3.4 percent unemployment rate), high school graduates (7.3 percent) and high school dropouts (10.8 percent) is worrisome. If the president wants to do something about income inequality, focusing on the dropout program would be a good idea.
4. We are back to the punch bowl problem. When will the Fed begin to wean the economy off quantitative easing? Dems want it to go on indefinitely so as not to hobble the weak recovery. But when the economy does begin steadily creating jobs with increased growth, we will need to begin shifting away from abnormally low interest rates.
5. The improvement in the jobs pictures suggests a small-is-better approach to governance. Modest budget deals are perfectly fine for now. In the long-term our entitlement problem is deeply worrisome, but so far this president has shown neither the will nor the ability to face up to it. It will have to wait for the next president.
6. Youth unemployment (ages 16 to 19) remains over 20 percent. Minimum-wage increases, which diminish entry-level job availability, are not the way to go.
7. We need accelerated growth to bring the economy in line with past periods of economic recovery. Jim Pethokoukis of the American Enterprise Institute writes, “There are still 1.1 million fewer employed Americans today than right before the recession started, despite a potential labor force that’s 14 million larger. And there are 3.6 million fewer full-time workers than back in 2007. . . . If the labor force participation rate [LFPR] were where it was a year ago, the jobless rate would be 7.9%, not 7% (and 11.3% if the LFPR were at prerecession levels, though closer to 9% if demographics-adjusted).” He points out that “it will take another five years to return to 2007 employment levels even at the improved job creation pace of the past four months.” Government should do no harm (see Nos. 1 and 5), but it would be better if both sides could agree on a package of growth-enhancing proposals.