Wednesday, January 15, 2014

Looking Ahead: An Uncertain 2014

By J. Mac Holladay, 
Founder and CEO

Just when we thought the Great Recession was history, the December job numbers come in. After November’s number was increased from 203,000 to 241,000, the December increase was a disappointing 74,000. Even health care lost jobs in December. Still, we averaged over 182,000 new jobs each month for 2013.

Add to that the reality that the labor force participation rate is at a 35 year low of 62.8 percent. The only reason the unemployment rate went down is that many people have quit looking for a job. In fact, the labor force shrank by 347,000 people in December. Sadly, it is not just folks “retiring” as we see the 45-54 age group drop 0.4 percent in December alone.

Our economist friends had predicted 200,000 new jobs in December. So what happened? Was it the weather? Is it an aberration as some are claiming? It is important to note as well that average wages only increased 1.5 percent over the last year. We are still 2 million jobs down from the beginning of the recession and nearly 38.0 percent of all the unemployed have been out of work more than 27 weeks.

The evidence that the Great Recession was like no other continues to confuse and confound almost everyone. A number of cities are now back to pre-recession employment levels, but the job quality remains a challenge. Poverty rates, particularly among children, continue at very high levels in many localities. After four and a half years since the recession ended, the State of Georgia is still 100,000 jobs below pre-recession levels, the unemployment rate remains at 7.7 percent, and the poverty rate has climbed to 19.2 percent.

At the same time, there are many pluses in our economy. Overall spending in health care has moderated growing only 3.7 percent in 2012. Medicare spending was up only 0.7 percent per beneficiary in 2012. Fourth quarter 2013 GDP was up 4.1 percent, the best several years. Consumer spending is improving as people buy cars and other goods and the stock market continues at near record highs. Kiplinger predicts 2.7 percent GDP growth for 2014 and job gains of around 200,000 per month.

Nariman Behravesh, chief economist at HIS, says “my advice is to ignore the jobs number.” Michael Hanson at Bank of America, however, notes “you can’t say it’s the weather, wash your hands, and be done with it.” So, what does 2014 look like? While an uncertain recovery remains all we know for sure, we can’t judge this recovery on job numbers alone. A recovery without quality jobs is little recovery if at all. Stay tuned.