The Corner

Labor Under Stimulus

The October jobs report contained much bad news and a few belated treats. Employers shed 190,000 jobs and the adult male and teenage unemployment rates are now at post-Great Depression highs. The unemployment rate jumped sharply, despite more Americans leaving the labor force. Fewer Americans are now participating in the labor market than at any point since 1986. When these Americans try to reenter the job market, the unemployment rate will spike again, and now an 11-percent unemployment rate does not seem very far fetched. Men will likely exceed 11-percent unemployment sometime in the next three months and teenagers will probably hit an unemployment rate of 30-percent plus.   

Individual sectors like construction and manufacturing continued to be hit hard. Heavy engineering construction employment is now down 11 percent since the passage of the stimulus bill and is still falling.  Congress never learns simply shoveling money out the door will not create jobs even for shovel-ready projects. 

There are some glimmers of hope, such as job losses in the previous two months being revised downward. Another is that the temporary-service industry increased employment by 33,700 jobs. A growth in temporary services often portends a growth in the labor market. This sector will be watched closely in the next few months to see if the increase is real or a one month blip.

Hours of work and overtime have stabilized or are even increasing. After the massive downsizing last winter, companies have been cutting hours instead of employees.  If that trend has stopped or reversed, then it is another sign that hiring could be on the upswing.

While the Obama administration promised that the unemployment rate would fall this quarter due to the stimulus bill, the October report shows that job losses are continuing and the unemployment rate will keep climbing. It also reveals the hollowness of the administration’s claim to have saved or created 640,000 jobs. While the stimulus may have directed funding to that many jobs, that money was taken from elsewhere in the economy, and the labor market has weakened considerably since the stimulus became law. Congress and the administration should look to encourage private sector businesses and entrepreneurs to invest and create wealth and jobs instead of trying to centrally plan a recovery from Washington.

 – Rea Hederman Jr. is assistant director of the Center for Data Analysis and senior policy analyst at the Heritage Foundation.