Looking back, it is clear that the jobs market turned in a solid and underwhelming performance in 2012. Last year was a slightly weaker re-run of 2011 with a significant decline in the headline unemployment rate. The January 4 Employment Situation Summary from the Bureau of Labor Statistics reveals that the unemployment rate remains at 7.8% with 155,000 net new non-farm payrolls. We started 2012 with 8.3% unemployment and ended the year with 7.8% unemployment. The broad inclusive unemployment measure, U-6, was unchanged in December at 14.4%. About 40% of our unemployed have been out of work for 27 weeks or longer. We saw upticks in adult female (7.3%) and African American (14%) unemployment. 2012 as a year and the December 2012 report, underline our modest expansion going into tax increases and spending cuts associated with budgeting and the fiscal cliff.
Negative contributions from the public sector have been restraining employment recovery. This will continue and intensify as spending cuts are agreed to around the fiscal cliff negotiations and debt ceiling talks. Thus, past breaks on growth are likely to remain, or intensify. We can expect some positive contribution from developing Asia in the first half and maybe a less negative influence from the eurozone? Present hopes for a robust and sustainable housing rebound seem overblown given the complete lack of household earnings increase and debt overhang from the last decade.
The missing piece of the analysis remains the cumulative damage from years of flat to declining wages, when adjusted for inflation. In 2012 average hourly earnings increased around 2% and the CPI was up 1.8%. Wages have just kept up, or failed to keep up, since the recession began. In short, America has not gotten a salary increase in 5 years. The debt overhang from the period 2002-2008 makes stagnant wages more painful. In addition, recently passed payroll tax increases will more than fully offset the nominal wage gains for the vast majority of working Americans. We are poised to see another year of no real after tax and inflation earnings for 75+% of the U.S. labor force. Thus, expansion will depend on growth in consumer debt or continued cost cutting from enterprise as governments are forced to trim expenditures -- if only modestly.
Weakness in earnings might have been offset if we able to have a dramatic and sustained increase in employment. We were not. 2012 adds another year of stagnant wage growth and lackluster job growth. Below find 2 charts that tell this story. Chart 1 looks at the population not in the labor force. The stubbornness of elevated populations out of the labor force is a long term concern and limits recovery. Chart 2 looks at the number of unemployed people. Here again we see numbers that remain elevated. Our economy is not raising wages, generating sufficient jobs to utilize new graduates and active job seekers. In addition, we have accumulated a significant pool of people left behind by our recovery. 2012 showed some real recovery. Our recovery remains dramatically underwhelming.
All of this suggests that housing and consumer discretionary expectations have jumped ahead of the macro economy. This may persist and we could import some strength from off-shore. However, wages remain where economic recoveries do, or do not, show up in real people's lives. Consumption remains 70% of U.S. GDP and it is hard to forecast optimistically given present labor market and wage trends.