We often liken the American economy to that of a roller coaster; plenty of ups and downs and, for better or worse, plenty of excitement. Similarly, the unemployment rate has dipped to surprising lows and crept to terrifying heights over the past few years. Despite the back and forth, there's a general consensus that recovery is upon us, albeit slowly, and that the worst is behind us. In fact, unemployment has more or less declined or stayed flat
, slowly but surely, throughout 2012.
The country's hoping that 2013 brings better fortune.
The Good News First
Likewise, the Department of Labor's most recent numbers
show unemployment at 7.7%, down from 7.9% last month, with the American economy adding 146,000 jobs. This leaves the unemployment rate as its the lowest since December of 2008, just four years ago, and represents a much better outlook than many economists predicted. Furthermore, the jobs numbers spelled good news for the stock market
“We've seen the private sector add jobs for 33 straight months,” said Marilyn Geewax, NPR Senior Business Editor regarding the numbers. “This month, December, is actually the fifth anniversary of the Great Recession. We literally began this recession in December of 2007. . . We went into such a deep hole - 10 percent unemployment, job losses that were just massive, people dropping out of the workforce.”
That bleak picture is thankfully becoming a fading memory for a number of Americans and their businesses.
With this in mind, however, there's scrutiny surrounding these new employment numbers. It seems that it's not all sunshine after all, and we certainly aren't out of the woods quite yet.
…And Now the Not-So-Good News
“I don't want to get too carried away with this good scenario,” Geewax pointed out, “We do like progress but if you're one of those 12 million people looking for work, this is still a very difficult time.”
One of the most notable red marks against the economy came with the revisions to previous unemployment numbers. In fact, the government noted that employers actually added 49,000 fewer jobs than anticipated in October and September. Although this may not seem earth-shattering in terms of economic impact, it most certainly speaks to the fragile state of the economy at large.
Furthermore, the drop in employment from 7.9% can be attributed to those who have dropped out of the workforce and have stopped looking for work altogether, as such individuals are counted as being unemployed. If we consider the revisions, which would leave the actual net job gain of 97,000, combined with the notion of more Americans dropping out of the workforce, well, the bleak future that we spoke of earlier doesn't seem so distant after all.
The concept of Americans dropping out of the workforce is not something that's entirely new or foreign, however, especially as the country ages. Regardless, the imagery of Americans simply “giving up” certainly does leave a great taste in our mouths. Additionally, consumer spending dropped 0.2% in October, its weakest figure since May of this year.
The aforementioned facts and figures are simply a sign of the times; no matter which way the economy moves, it appears that it's going to move very slowly.
Did Hurricane Sandy Play a Role?
Of course, we must also consider the impact of Hurricane Sandy on the American economy.
“Hurricane Sandy forced restaurants, retailers and other businesses to close in late October and early November in 24 states, particularly in the Northeast,” Geewax stated. “Many people couldn’t get to work and weren’t paid. The government counts those cases as job losses, even if they are temporary. Those subtractions would reduce net hiring.”
Some economists described such impact as “minimal;” however, the many small businesses
and local economies ravaged by the storm certainly have room to disagree.
“You've got a lot of small businesses that took a big hit in Connecticut, New Jersey, New York,” Geewax continued. “These are very populated parts of the country. Millions and millions of people.”
In terms of actual numbers, construction employment dropped by approximately 20,000. Furthermore, the storm prevented an estimated 369,000 people from working, although they were technically counted as “employed” in the report.
The Fiscal Cliff Strikes Again
Once again, the looming fiscal cliff debate does little to help out small businesses who've been struggling to hire. Geewax, alongside a number of economists, noted that small business hiring has actually been as its lowest level in four years. Uncertainty over the cliff keeps those hiring prospects murky. Many headlines tease the promise of a deal coming sooner rather than later, but if the debt ceiling debate of 2011 taught us is anything, perhaps Americans hoping for an early deal shouldn't get their hopes up quite yet.
“On every level, these fiscal cliff negotiations are causing problems in the job market, in the whole atmosphere in the country,” Geewax said. “Everyone is just waiting and waiting to see how this turns out.”
Despite uncertainty, next year could hold promise if the fiscal cliff is avoided or a deal is made; furthermore, the economy will be looking to receive a boost as efforts to rebuild the Northeast continue after Hurricane Sandy.
The Bottom Line