hire_me_unemployed_reutersFriday’s December jobs report was a major disappointment, showing the economy gained just 74k jobs last month. Economists had expected the economy to gain around 200k jobs. The unemployment rate, however, dropped to 6.7% as 347k frustrated job-seekers gave up and left the labor force. We are in an upside-down world where a drop in the unemployment rate is a bad sign for the economy.

The overall labor force shrunk dramatically last year. In December 2012, 155.4 million workers had a job or were actively looking for one. Last month, though, 154.9 million were in the labor force, a drop of over 500k Americans.

It is important to remember that the population grew last year. The US adult population grew by around 2.5 million people. If the labor force were the same percentage of the adult population as last year, 2 million more adults would have jobs or be actively looking for employment. Their disappearance is a drag on the economy.

Democrats are currently agitating for an extension in long-term unemployment benefits. They have made it a major political fight, most likely to distract from ObamaCare. The real issue, though, is that we even still need long-term unemployment benefits. The recession officially ended over four years ago and the media is bloated with stories about the economic “recovery,” yet the job market continues to erode. Democrats ought to be more concerned about creating jobs, rather than mitigate the lack of them.

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Oddly, Democrats are also expected to make a major push to raise the minimum wage, i.e. starting wage. This has few benefits for the overwhelming majority of Americans, as only around 2% of the workforce makes the starting wage. It would like cause a modest increase in prices for consumers, but the biggest impact is in reducing the number of first-time jobs. Lifting the starting wage has a mild negative effect on the overall economy by reducing the number of jobs. These negative effects, however, are concentrated on those trying to enter the labor force.


The US should pursue policies that help workers enter or reenter the labor force. Erecting barriers to this suggests the nation may shed more workers in 2014.




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