U.S. Employment Woes Continue Despite Small Recent Improvements

After the headline rate of unemployment (U-3) reached 8.5 percent in December 2011 ( the most recent month reported), some commentators began to talk as if the employment situation is now improving rapidly. Some have gone on to suggest that those of us who have emphasized the role of regime uncertainty in retarding the current recovery are now barking up the wrong tree, if indeed we ever had a valid point. To speak of employment woes as old news, however, is highly premature.

The Labor Department has recently made public its preliminary estimate of nonfarm employment for 2011.  I have added the department’s data for previous years, back to 1999, to construct this table.

Employees on nonfarm payrolls, 1999-2011

(annual average, in thousands)

Year        Total           Private

1999…… 128,993         108,686

2000….. 131,785         110,995

2001…… 131,826         110,708

2002…… 130,341         108,828

2003…… 129,999         108,416

2004…… 131,435         109,814

2005…… 133,703         111,899

2006…… 136,086         114,113

2007…… 137,598         115,380

2008…… 136,790         114,281

2009…..  130,807         108,252

2010…… 129,818         107,337

2011(p).. 131,159         109,080

The good news is that private nonfarm employment has grown since its recent trough in 2010: the increase in 2011 amounted to 1.6 percent. This is not much, but it’s better than continued decline.

The bad news, however, is that private nonfarm employment in 2011 was still 5.5 percent, or 6.3 million persons, below its peak number in 2007. Moreover, looking back farther, one sees that private nonfarm employment in 2011 was less than the corresponding number in 2000. For private employment, the past ten years have been, indeed, a lost decade.

In contrast, private nonfarm employment grew by almost 22 percent between 1990 and 2000, and by almost 23 percent between 1980 and 1990.  Americans need to understand that private employment is “where the babies come from.” Make-work jobs on the government payroll are not a good substitute. To keep the flow of genuinely valued goods and services growing at anything like the historical norm, private employment must grow substantially, at least over the medium term, yet in this regard the past decade has been a complete wash. Moreover, at the present rate of increase (1.6 percent per year), it will take almost 4 years just to get back to the private employment level in 2007, before the current recession began.

Stagnation or slow, on-again-off-again growth in the economy’s most important productive input is not the sort of thing of which sustained economic growth is made. Despite the recent, slight employment gains, the U.S. labor market is not even close to being out of the woods, nor is the overall economy, which continues to labor under major threats of government regulation, taxation, and other damaging intervention in the market process.