Unemployment drops to 9.4 percent, but substantial job growth yet to take hold
Friday, January 7, 2011; 10:27 PM
The jobless rate fell by the largest amount in a dozen years last month, a welcome sign after years of economic misery. But behind the figures was another, less sunny reality: Employers are creating jobs too slowly to keep pushing down unemployment.
The unemployment rate was 9.4 percent in December, down from November's 9.8 percent, according to the Labor Department. The improvement, however, reflected not only people finding jobs but also a nearly equal number giving up and dropping out of the workforce. Employers added only 103,000 jobs to their payrolls, an improvement from November yet too few to keep up with population growth.
The report showed, as Federal Reserve Chairman Ben S. Bernanke said in congressional testimony Friday, that a solid recovery "may be taking hold" and that growth will probably be "moderately stronger" this year than it was in 2010. Yet it could take four to five years for the job market to get back to normal, he said. Bernanke also warned that the country could face another crisis if the government fails to rein in its budget deficit, causing a loss of investor confidence in the United States and "broader financial turmoil."
Taken together, the jobs numbers and Bernanke's remarks show the U.S. economy is a bundle of contradictions as 2011 begins. Growth is well-entrenched, and even accelerating. Still, the expansion is too weak to return the economy to full employment, and a range of longer-term threats loom.
Continued high borrowing levels by the government "would both drain funds away from private capital and increase our foreign indebtedness, with adverse long-run effects on U.S. output, incomes and standards of living," Bernanke said.
His comments come as a showdown is developing between the Obama administration and congressional Republicans over raising the federal government's debt limit, which may need to happen as early as March 31 to keep the government from defaulting on its obligations. Some Republicans say they will not raise the limit without spending cuts, while administration officials call such threats irresponsible.
Tig Gilliam, chief executive of Adecco Group North America, a large employment services firm, said the new jobs figures show that a recovery is taking place, but slowly.
"Things are moving in the right direction, but it's not a recovery on fire," he said.
Reflecting that mixed picture, the Obama administration responded to the new numbers cautiously.
"We know these numbers can bounce around from month to month, but the trend is clear," President Obama said Friday morning. "We saw 12 straight months of private-sector job growth. That's the first time that's been true since 2006."
The president's chief economist, Austan Goolsbee, pointed out in an interview that the private sector added jobs in every month of 2010 and that each quarter showed stronger average job growth than the previous one.
"I thought today's numbers were pretty encouraging," said Goolsbee, chairman of the Council of Economic Advisers. "We clearly see a trajectory of improvement, and that doesn't even include the impact of the tax deal the president signed in December."