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80,000

There is a simple and fundamental principle when it comes to job creation, create enough jobs to keep up with population growth. While the US population is getting older, it is still growing. On average, 240,000 or so people are added to the population every month. Assuming fifty percent of the population needs to work to support the other fifty percent (kids, students, retirees, etc), the US needs to create an average of 120,000 jobs every month just to stay even with the growth of the population. Anything less than this is an effective economic contraction, where fewer workers are supporting more people. Yes, it is possible to increase GDP while work participation falls if worker productivity goes up, however this is an unstable situation as smaller disruptions in employment have ever larger ramifications for the well-being of the whole population.

This knowledge in hand, we can now fairly evaluate the October jobs report, given to us here from the AP:

The American job market improved modestly in October, and economists looking deeper into the numbers found reasons for optimism — or at least what counts for optimism in this agonizingly slow economic recovery.

The nation added 80,000 jobs. That was fewer than the 100,000 that economists expected, but it was the 13th consecutive month of job gains. Fears of a new recession that loomed over the economy this summer have receded.

The unemployment rate nudged down, to 9 percent from 9.1 in September.

We can already see a problem here. If the economy created 80,000 jobs, we are short of the necessary number of jobs to keep up with the population. So why did the rate change? It could be anything from discouraged workers leaving the workforce to statistical noise. Remember, the government only tracks people who have had jobs and lost them as unemployed. Young people out of college, never previously employed, who can’t find a job, are not counted.

“Those are pretty good signs,” said Michael Hanson, senior economist at Bank of America Merrill Lynch. “We’re hanging in there.”

By that he means, I guess, that the job market has gotten worse.

No one looking at Friday’s report from the Labor Department saw a quick end to the high unemployment that has plagued the nation for three years. The jobless rate has been 9 percent or higher for all but two months since June 2009.

Again, the rate is not important. What is important is that we are failing to create enough jobs to keep up with the population. And that means the millions of jobs lost during the recession are simply not being replaced.

The government uses a survey of mostly large companies and government agencies to determine how many jobs were added or lost each month. It uses a separate survey of households to determine the unemployment rate.

The household survey picked up a much bigger job gain — 277,000 in October, and an average of 335,000 per month for the last three months. The household survey picks up hiring by companies of all sizes, including small businesses.

Gallup also noted a large decrease in their unemployment rate (which is based on their survey methodology). This is mildly good news. Eventually we’ll get better agreement between the different methodologies. Here’s the problem. If 335,000 jobs are truly being created every month, then we can expect the economy to recreate the millions of jobs lost during the recession (about 8 million) in about three more years. Still, let’s continue down the road of optimism for a while:

The household survey is more volatile and less comprehensive than the other survey, and is not followed as closely by economists. Still, job growth in the household survey has not been this strong for three months since the end of 2006.

People counting themselves self-employed increased by 200,000 in October, accounting for most of the increase, but it is difficult for economists to explain the three-month trend.

So, we have our smoking gun. People aren’t being hired by large businesses more than before. Small businesses aren’t picking up the slack. People are instead setting out on their own. And there’s nothing wrong with that. But we have to ask 1) will these ‘jobs’ last, or are they fleeting? 2) would these people make more money and produce more wealth if they were working for an established business 3) how many more people can follow this route?

Moving along:

“Overall, while this report is not good enough, several key numbers are now moving in the right direction,” Ian Shepherdson, an economist at High Frequency Economics, a data analysis company, told clients. He said the prospects for the next few months “seem to be improving.”

The job gain was the smallest in four months. And because the population is always growing, it takes many more jobs, about 125,000 a month, to keep up with population growth, more to bring down the unemployment rate.

Nice they decided to mention this sometime.

The job market turned consistently negative in February 2008. The nation lost jobs for 25 months in a row — almost 8.8 million in all. Since then, the economy has only recovered 2.3 million jobs. The adult nonmilitary population has grown 7.5 million.

Halfway through is piece, and the mood has changed completely.

The Federal Reserve earlier this week lowered its economic forecast for the rest of this year, and said unemployment is not expected to fall significantly through the end of next year. It should still be at 8 percent even through 2013, the Fed said.

Maybe by then everyone will be self-employed.

President Barack Obama will almost certainly go before voters next November with the highest unemployment of any sitting president seeking re-election since World War II. The highest so far was Gerald Ford, who faced 7.8 percent unemployment in 1976 and lost to Jimmy Carter. Ronald Reagan faced 7.2 percent unemployment in 1984 and beat Walter Mondale in a landslide.

It should be remembered that Reagan was enjoying GDP growth three times higher than what Obama has gotten since the bottom of the recession.

Some more specifics:

Hiring last month was broad. Professional and business services, which includes the accounting, engineering and temporary help industries, added 32,000 jobs. Hotels, restaurants and entertainment companies added 22,000. Health care added 12,000.

The construction industry cut 20,000 jobs for the month, the most since January. That industry is examined closely because a pickup in the housing market could add force to the economic recovery.

Construction is still in decline, good to know.

The number of discouraged workers, those who have given up looking for work and are no longer counted as unemployed, is down 47,000 from last year, at about 2.55 million. And there were fewer people with part-time jobs who were looking for full-time work, another positive sign.

The economy grew at an annual rate of 2.5 percent in July, August and September, its best performance in a year. In the first half of this year, the economy expanded at the slowest pace since the Great Recession ended in June 2009.

The stronger economy over the summer was powered by consumer spending, which grew three times as fast as it had this spring. Americans spent more even in the face of fears of a new recession and wild gyrations in the stock market.

Still, companies appear to be waiting for customer demand to pick up even more before they hire again in great numbers. People have been dipping into savings to finance their spending, and that may not be sustainable.

Incredible no one sees the connection between the increase in consumer spending and the decrease in savings. If people are using what money they have saved up, or putting more costs on their credit cards, that is not a good sign.

We’re so desperate for good news, we’re holding onto anything that can be spun in a positive way, regardless of truth.

Continuing…

Companies learned during and after the recession to live with fewer employees. Worker productivity rose from July through September by the most in a year and a half. More productivity is usually good because companies can pay workers more without raising prices. But workers generally are not getting raises this time.

Companies have learned to squeeze more productivity from fewer workers, and they’re not passing at least some of the extra income to their workers. More good news!

Almost done. What else is there to point out?

More recently, economists have fretted over a debt crisis in Europe. Europe buys 20 percent of American exports, so a slowdown there would take a bite out of the U.S. economy, too.

It’s nice to know, even if we do everything right, someone else can screw it up for us. I feel better already.

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