I am cautiously optimistic about the job numbers. Although a decline of just 11,000 is much, much better than previous numbers, it could reflect a “blip” in the trend or a “rogue” month.
Labor-force participation is still falling, so to some extent the reduction in unemployment could be statistical — the number of people looking for jobs is falling so the unemployment rate drops. So, we will need more than one month of data to really get a feel for what the economy is doing.
Nevertheless, the downward revision of job losses for October is another sign of building strength in the economy. We could plausibly be seeing a shift in momentum.
If the economy is recovering, it probably has a lot more to do with effective monetary policy than the spending side of the stimulus package. Only 30 percent of the stimulus funds have been allocated, so federal spending really can’t claim much in the way of economic success.
Finally, we need to be careful not to confusing stabilizing unemployment with real job creation. If the new jobless number is an indicator of the economy reaching its trough in the business cycle, meaningful job creation will require jump starting private investment that adds real economic value. That’s not a matter of redistributing dollars and spending in the economy. It’s about re-aligning investment priorities in ways that generate profitable returns for businesses creating products and services in line with the needs of businesses and consumers.
– Samuel R. Staley is Robert W. Galvin Fellow and director of Urban & Land Use Policy at the Reason Foundation.