Election 2012's Big Question: Is The Jobs Picture Improving?

Is the jobs picture better in 2012?

Are you better off than you were four years ago?

It's the quadrennial question that hangs over every presidential election. Four years ago, with a devastating financial crisis gripping America and the world, the answer was obviously, "no." This time around, the answer is more complicated. The official unemployment rate ahead of the election is 7.9 percent, which is 0.1 percentage point worse than the month Barack Obama took office in 2009.

There are good cases to be made for both why the U.S. economy is improving, and why it is getting worse.

Evidence that things are getting worse:
  • The number of planned layoffs by firms jumped 41.1 percent in October to 47,724, the highest level in five months. The big names reporting the layoffs cut across many sectors, from Colgate-Palmolive to UBS.
  • This quarter is seeing the slowest period of corporate earnings growth in the S&P 500 since the third quarter of 2009, according to a report by USA Today. This development can help to explain the rise in layoffs.
  • The struggles of the long-term unemployed workers, those out of work for more than 27 consecutive weeks, continue. The number of Americans in that category crept up to 5 million in October -- up from 4.8 million in September and 2.7 million in the month when Obama was sworn in.

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Evidence that things are getting better:
  • There was a slight uptick in people encouraged enough to try and look for work again. Known as the labor participation rate, the figure rose by 578,000 Americans in October from September, resulting in an overall rate of 63.8 percent, or 0.2 percentage points better than the previous month.
  • Consumer spending, a crucial economic barometer of general confidence, saw a jump of 2.1 percent last quarter after a 1.5 percent pace from April through June.
  • Gross domestic product rose at a 1.8 percent annual rate after growing at a 1.3 percent pace last quarter, according to a Bloomberg forecast.

So which is it?

The answer: The economy is both getting better and worse at the same time, and staying the same, according to economists who aren't aligned with either political party.

'An Uneven Economy'

"It's an uneven economy," says Adolfo Laurenti, the deputy chief economist for Mesirow Financial, the Chicago, Ill.-based financial consultancy. "Both sides are true," adds Zach Karabell, the president of River Twice Research, a New York-based economic consultancy: "We're in the situation we've been in for years, trying to remove the cobwebs from our eyes. And I think we're going to be in this for a while."

According to Laurenti, while there are positive indicators, hiring gains are extremely modest, as employers only seek to fill immediate openings, as opposed to expanding in a way that requires whole new staffs. "You are not seeing 200,000 or 300,000 in the monthly jobs report," the figure that he says would indicate a deeper jobs recovery. (The October report saw the hiring of 171,000 new workers.) "Any hiring that's going on is very opportunistic," referring to the model of businesses simply hiring for the purpose of filling vacancies created by circumstance, as opposed to a new economic confidence and growth opportunities.


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Crucial to understanding the nature of the current employment environment, says Laurenti, is factoring in the steady stream of baby boomers who are retiring. The figure has been pegged at 10,000 new boomers hitting retirement age each day, and so many "new hires" are just replacing retiring workers. Employers, in most cases, aren't creating brand new jobs. "What we are really seeing is a large effort to replace," says Laurenti.

Other key data points also suggest that there hasn't been a broad jobs recovery. Employers in most sectors are not making substantive capital investment in buying new machinery and equipment for their workplaces. "This suggests that firms are very short-term oriented, and not thinking about new long-term projects" for which they will want to hire new workers, says Laurenti.

The 'Uncertainty Principle'

What's the reason for employers' hesitancy? There are many factors.

Karabell, and others, have cited the "uncertainty principle" and say that explains the stagnant job market. As Karabell put it in a column in Time magazine, the "explanation of many businesses is blunt: We aren't hiring because we're uncertain about government policy."

Employers' uncertainty has only been intensified by the looming "fiscal cliff." On Jan. 1, "one of the biggest shocks to the economy since the financial crisis four years ago," in the words of DailyFinance, is scheduled to take place when federal law will force federal spending to begin falling until the total of $607 billion is dropped for 2013. The event is the result of several overlapping legislative deadlines, including the slashing of $1.2 trillion in federal spending after Congress failed to reach a deal on the debt ceiling last summer.

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And then there is the shaky global economy, still reeling from the ongoing Eurozone crisis. Just last month the chief of the International Monetary Fund, Christine Lagarde, said action needs to be taken across the globe to "lift the veil of uncertainty" hovering over the global economy.

All of this uncertainty is discouraging many businesses from adding brand new jobs. Only 16 percent of small-business owners reported that they plan to add employees this year, according to a U.S. Chamber of Commerce poll for last quarter. Large corporations are, however, more willing to hire. According to a recent report by Reuters, eight of 10 companies in the Dow Jones industrial average were adding jobs this year. They included giants such as Walmart and Alcoa.

The 30-Year View Of The U.S. Economy

Finally, many economists take a longer view when it comes to answering the question, "Are you better off?" To understand the current economic environment, global economists study the 30-year period of borrowing that preceded the financial crisis. In that context, the U.S., under Obama, has performed better than expected in terms of real GDP growth per capita. Finally, when looking at jobs creation in the private sector, the numbers under Obama are similar to what took place while George W. Bush was president.

Of course, even economists such as Karabell acknowledge that Americans' experience of the economy comes down to the individual. "As an individual, maybe you're better off not paying attention to these numbers, as they don't tell you anything about your situation."

What do you think? Is the jobs climate better or worse now for you? Share your comments below.

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