Across the last month of 2013 there was very low job growth, 74,000 net new jobs with no growth in the workweek and no growth in earnings. Some reports explain every strength, and others explain every weakness, in the labor markets. The December 2013 report exemplifies all the recent structural economic problems. We had very weak job growth, declining labor force participation, falling unemployment rates and hundreds of thousands walking away from the labor force. Some of this decline may be the leading edge of the expiry of extended unemployment benefits. Of course, one month is of very limited value and does not make a pattern. Consensus expectation was for 200,000 plus net new non-farm payrolls. The statistical bright spots were that the headline unemployment rate fell .3% to 6.7% and November job creation was revised up by 38,000 jobs to 241,000 net new November jobs.
Labor force participation and earnings continue to be our focus areas. Real and enduring growth will require that we reverse a distressing trend of people leaving the labor force. Additionally, we tend to have a policy and discussion focus on the unemployed. Of course this is reasonable and important. However, 93% of the labor force is working. The wages of the employed set the pace for aggregate demand, consumer confidence and economic expectation. We have seen no real wage growth for 5 years. This is dragging down the strength and sentiment of the American economy and will continue to do so.
Below we see the last decade in total jobs in the US. It is clear that while our population has continued to grow, if very slowly and not in every year, we have not grown jobs. We are struggling to get back to the jobs level we had before the recession, but with a larger population. This contributes to the declines in labor force participation.
We continue to see people leave the labor force; with younger workers we are seeing millions never enter the labor force. There is reason to fear long-term consequences for the young people coming of age in this period of pronounced labor market weakness.
These numbers will be closely watched and hotly debated as we are in the midst of discussion about how quickly and completely the Federal Reserve will withdraw its support for the economy as the Fed passes from Bernanke to Yellen. We are seeing increased agitation over raising the minimum wage and rising inequality. Labor market weakness, flat real wages and a lack of job opportunity are fueling and exacerbating these tensions. As the books are closed on 2013, from a job creation perspective, 2013 was not better than 2012.
Weak numbers fit easily with delayed or reduced tapering from the Fed. Thus, as we see rates drift down, equity sentiment/prices will likely rise with bond prices. The bigger issue is the inability of the economy to achieve "escape velocity". We are likely to still need massive fiscal and monetary support to achieve lackluster and inadequate private sector economic strength. On the heels of a 30% up year, where is the domestic economic strength to support asset inflation? If such strength is not there organically, are we reliant on the fiscal and monetary policies most on the street oppose? If so, we had better hope the Street does not get the policy shifts it is asking for!