Three pieces of seemingly good economic news dominated the headlines last week. The official unemployment rate dropped to 7.0 percent, its lowest level since 2008, reflecting the fact that the economy has created upwards of 200,000 jobs for each of the past two months.
The GDP growth rate for the third quarter was revised upwards to an impressive 3.6 percent. And while money markets briefly lurched downward out of fear that the good news would cause the Federal Reserve to slow down its program of massive bond purchase, quite possibly raising interest rates and aborting a stronger recovery, the markets quickly shook off those fears. Investors and traders evidently concluded that the economy had found a Goldilocks spot of not too cold and not too hot. Stock indexes closed the week only a shade below their historic highs.
Should we be encouraged? Is this, at long last, the recovery of broadly shared prosperity we've been waiting for? Not yet, I'm afraid.
But one thing I'm not worried about is the Fed. With Janet Yellen as chair, the Federal Reserve is likely to continue its policy of keeping interest rates as low as possible for as long as the economy needs this source of stimulus. It's the rest of the government and the deeper trends in employment that worry me.
Although it now appears that the Republicans and Democrats are on track to strike a budget deal that avoids another government shutdown and that even restores a few tens of billions in federal spending and maybe extends unemployment insurance as well, the Federal government's long-term budget trajectory is still a source of deflation rather than stimulus.
Past budget deals since 2010 have imposed 10-year cuts well into the trillions, at a time when the economy needs more public investment, not less. Public sector employment -- federal, state, and local, is down 1.47 million jobs since the economic crisis began.
Most analysts believe that the impressive growth posted in the third quarter was a one-off, the result of businesses rebuilding inventories, and that growth will settle back down to around 2 percent or less in the fourth quarter. None of this modest progress is enough to change the underlying pattern of a very feeble recovery with highly uneven gains.
The fact that the stock market rallied on the economic news is not a great sign either. It meant that moneyed elites are reassured that the recovery is too weak to generate wage pressure, or pressure for the Fed to raise interest rates. The slightly better news on the jobs front conceals deeply troubling longer-term trends. The share of long-term unemployed (out of a job for six months or more) was up from October, to 37.3 percent, and the number of long-term unemployed actually rose slightly.
The share of working age people in the labor market (and thus counted in the unemployment statistics) is still at historic lows. The percentage of prime working age (25-54 years old) people in the labor force in November was 75.9 percent, unchanged since September. The unemployment rate keeps dropping mainly because discouraged workers keep dropping out.
Wage gains remain paltry. Most of the jobs are being created in sectors that pay lousy wages. The casualization of the workforce continues apace. Millions of people who want full time jobs still work part time. Wages are still lagging far behind productivity growth, as the top one percent captures the lion's share of the nation's economic gains. The needed policies to reverse that trend -- drastic reform of Wall Street, tighter regulation of labor markets, stronger trade unions, a more progressive income tax, more public investment -- are still at the fringes rather than at the center of national debate.
Though the increasing momentum of the movement for higher minimum wage laws is politically encouraging, we have a very long way to go before the minimum wage is a true family wage sufficient to keep a full time worker and that worker's family out of poverty.
The worst outcome would be if the modestly good economic news of the past week were cause for complacency. Deep structural and political trends have made this an economy in which tens of millions of working families keep falling behind. It will take profound political and economic changes to restore an economy of shared prosperity.