At the same time more economic data are signaling slowing American productivity, the number of unemployed has begun rising once again. In today’s employment situation report, the number of unemployed persons ticked up by 164,000. Hardest hit were blacks whose unemployment rate increased to 14% from 13.2%, and adult women whose unemployment rate increased to 7.3% from 7.0%.
Job creation slowed as well. Only 155,000 jobs were created in December, compared to 161,000 in November. In December, government payrolls shrank by 13 thousand, the third consecutive month of declines driven predominantly by state and local level cuts.
The broadest measure of unemployment, U-6 remained at historically high levels in December. About 14.4% of the American workforce is unemployed, marginally attached to the labor force or working in part time positions because they can’t find full time employment.
Without factoring in possible upward revisions, 2012 created fewer jobs than 2011. That despite untold fiscal and monetary stimulus throughout the year. More frightening however is that much of that stimulus looks like it will expire or be wound down in 2013, making prospects for this year grim. The payroll tax cut that has been putting more money in 77% of Americans’ pockets each week is set to expire, as are tax breaks for the most productive Americans (those earning more than $400,000). Factor in the Federal Reserve’s newly unearthed desire to put its radical monetary policy to bed earlier than expected, and the naked truth of the economy is being exposed as the tide of money rolls out to sea.
You can see in the chart below that the Conference Board’s index of Coincident Indicators is developing a disturbing year over year trend. The index is made up of very similar indicators to those used by the NBER to determine the beginning and end of a recession. Unless this index starts to perform better, the U.S. economy is in for more tough times ahead.