Friday, January 21, 2011

Unemployment: The Weakest Link

Joblessness is still in the forefront of the nation’s consciousness. Although the economy continues to add jobs, it struggles to keep up with a growing workforce. Therein lies the weakest link to the economic recovery (although some would argue that the Housing Market is actually the heavy, draining the life out of recovery). Even though the jobless rate has dropped to its lowest point in nearly 2 years, the reason for the huge drop in the rate this time around is because the number of unemployed fell by over 500,000. That, fortunately brings the unemployment number down to 14.5 million. Economists believe that this is not reflective of increased employment, but rather the uncounted faction of the unemployed that have simply stopped looking for work. Nevertheless, the Labor Department stats illustrate a sharp decline in unemployment applications in the past month, which represents the least applications over a 4-week period in 18 months.
So, What Needs to Happen to Bring the
Unemployment Rate Down Significantly?

In the past quarter, the monthly average job-growth has been 128,000. That’s great for those lucky enough to be sliding into new jobs, but unfortunately it's just enough to keep up with population growth. It is estimated that the economy needs to see at least twice as many jobs added each month to bring the unemployment rate down significantly. You're probably wondering if this is achievable anytime soon? Well, there are certainly signs that are pointing to a real possibility, as the economic recovery appears to be gaining momentum. Further, it is anticipated that this year we'll finally begin to see traction in private sector job growth. Economists have indicated that this year should double the 1.1 million jobs added in 2010. That, along with the extended Bush tax cuts, should rev up consumer spending. Increased consumer spending will eventually spur business spending - and business spending is good news for job creation.

I was encouraged to learn that the Obama Administration has created an advisory board, headed by Jeffrey Immelt (GE's CEO), which will focus on fostering private-sector job growth. This panel will be officially unveiled in the President's State of the Union Address this week. Ever the optimist, I remain hopeful.

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K. Reilly
The Cohn Reilly Report

1 comment:

  1. The unemployment data is coming in with more adjustments. I saw an article in the Daily news that mentioned that the ADP account of the increased momentum in private sector jobs is more valid than first thought. These economists need to get a clue. I guess we have to wait until the end of the 1st quarter before we get final data on the last quarter of 2010. Even with technology we are so close, and yet so far.