Looking for signs of recovery
- December 7, 2009
Is the latest national unemployment report a sign of better times to come or just a tease that will get our hopes up prematurely?
The national jobless rate dropped from 10.2 percent in October to 10 percent in November. More significant, perhaps, was the fact that 11,000 jobs were shed during November, down from the stomach-churning declines of 597,000 in November 2008 and 741,000 last January.
In addition, the numbers for temporary help services and average work week hours rose, indicating that employers may be getting more orders and are stretching their work force to meet demand.
Christina Romer, chair of President Obama’s Council of Economic Advisers, heralded the jobless figures as good news. The report “was the most hopeful sign yet that the stabilization of financial markets and recovery in economic growth may be leading to improvements in the labor market.”
Romer’s mention of recovery alludes the fact that, technically at least, the recession ended in September. The nation’s gross domestic product grew in the third quarter even as unemployment continued to soar.
Can the economy really be in recovery if people are still losing their jobs? Yes, it can. Virginia economist Christina Chmura notes repeatedly in her talks around the state that unemployment typically rises for several months after a recession ends.
When business begins to pick up, companies are understandably reluctant to hire new employees right away. They tend to pay current employees more overtime and temporary workers until reaching a point that they can’t meet demand with their current staffing. That’s when employment begins to grow.
But before we get carried away with optimism, we should take note of a couple of comments made today by Federal Reserve Chairman Ben Bernanke in a talk to the Economic Club of Washington.
Bernanke said that economy faces “formidable headwinds” that will slow its recovery. Credit is still tight for consumers and and labor market remains weak.
“Household spending is unlikely to grow rapidly when people remain worried about job security and have limited access to credit,” he said.
Considering that consumer spending typically makes 70 percent of the economy, the scenario recalls Catch 22: Companies won’t add jobs until the economy revives, the economy can’t revive until consumers begin spending, and consumers won’t spend until they stop worrying about their jobs.
November’s jobless report make a sign of better times, but it could be like the first South of the Border billboard seen while headed south on Interstate 95. There are many more signs to come for a destination still far away.