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The U.S. jobs market finally showed signs of improvement last month after the unemployment rate dropped to 9.4%. That was down from 9.8% in November and represented the first real change in any direction in months.
In fact, that decline pushed the national jobless rate down to its lowest level in 19 months, and created the first sense of optimism in more than a year.
Some analysts think December's numbers represent a sea change in the U.S. jobs market, and will mark the start of sustained improvement. They cite increasing job listings in 2010, rising corporate profits in 2011 and upward revisions of previous unemployment reports as reasons the job market pain could finally be subsiding.
"All the preconditions for much better jobs growth are in place," Mark Zandi, chief economist at Moody's Analytics' Economy.com, told CNBC. "If history is a guide, this is about the time in the last two business cycles that business started to step up and hire."
But not everyone was so sanguine. After all, about 14.5 million people remain unemployed, and 6.4 million have been jobless for more than six months.
With a growing U.S. budget deficit and overly accommodative U.S. Federal Reserve policies encouraging overspending, many Americans are hard-pressed to believe that there's any kind of sustainable improvement at hand – in the job market, or in the economy in general.
Many economists attribute the drop to the fact that discouraged workers have stopped looking for new jobs, which means they're no longer counted as part of the unemployment rate. The number of discouraged workers in December rose to 1.3 million.
"Incredibly, the U.S. labor force is now smaller than it was before the recession started, though it should have grown by over 4 million workers to keep up with working-age population growth over this period," Heidi Shierholz of the Economic Policy Institute told CNN.
Many job hunters that did find positions settled for jobs that are below their skill and experience levels, and that don't meet their salary expectations – an unsatisfactory situation known as "underemployment."
More than half of the full-time workers who were laid off between 2007 and 2009 after three or more years at their positions reported wage declines in their new full-time employment, according to the Labor Department. Of those who were rehired, 36% reported a salary cut of 20% or more.
The rate of underemployment – a typical offshoot of a labor market that's struggling with long-term problems – reached a staggering 16.7% in December.
"The deeper the recession, the lower the wage you're going to get in the next job and the lower the quality of the next job," Till von Wachter, a Columbia University labor economist, told The Wall Street Journal.
Usually wages fall at a slow rate. But during the most recent stretch of high unemployment, wages have experienced a much sharper decline. And with the conventional measure of joblessness – the unemployment rate – expected to remain above 9% for 2011, the downward pressure on wages will continue.
While those who are underemployed are still working, they often have to cover the lower income with stricter personal budgeting and less spending. In an economy that draws 70% of its firepower from consumer spending, a tough job market will almost certainly hamper overall economic growth – slowing an already-tepid recovery.
In the odd sort of "Catch 22" that has the economy feeding off the job market, and vice versa, that tepid recovery could lead to slower hiring, or even additional job cuts.
This prompted last week's Money Morning "Question of the Week": Are you worried about your job? Do you feel safe from the threat of unemployment, or is your position, company or industry vulnerable? Has your employment situation changed at all during the financial crisis? Do you feel you are underemployed?
The following reader responses highlight the struggle many have with finding and maintaining employment, and how many job opportunities may no longer be available in the United States.
Industry Shift to Unemployment Line
I have been out of work for one and half years and my unemployment has just finished. Something is terribly wrong. I use to own my own textile company but as you know, the textiles industry is a thing of the past here in the United States.
– Debbie W.
Jobs Pushed Overseas
My husband has been out of work for one year and he has finally and hopefully gotten a job. I just look at all the money that is wasted for big commercials, government dinners and balls, election campaigns, trips and the list goes on and on. This money could be used to better this country in a time of need.
Until we bring back hands-on manufacturing here on U.S. soil so the middle group will thrive, we will continue to have problems. Our problems began when plants closed down all over the United States and the full effect has reared its ugly head in the last two years!
Hey, weird thoughts, but…if all millionaires donated just $1 million at one time into the same fund, then we wouldn't have a country in so much trouble! Also if every country on earth would wipe out all debts at the same time then we also would be able to start over and this time on the right path!
– Denise K.
Foreign Job Opportunities May Be the Best
I took an early retirement with a generous severance package three years ago because my job was looking shaky. I have not been sorry, and my wife and I just moved to Ecuador to take advantage of a lower cost of living and a great climate.
However, our two sons are looking at options right now, and I hope they are able to make things work. One of them is a senior in college, and the other graduated last spring and is working on a one-year internship, which he thinks will lead to a good job. In the meanwhile, he is making enough to support himself, which is a nice baseline to start from.
If the economy can continue to grow, then I think they will do fine, but I suspect that we have some serious rough spots ahead. I just hope that they have the skills that they need to cope. The senior in college thinks that he might well like to work outside the United States for a while upon graduation, and I have not discouraged him. I am sorry to say that I think that the best opportunities throughout his working career are likely to be in the developing world, rather than in the USA.
– Gordon F.
Job, Yes; Paycheck, Maybe…
Of course I will still have a job – I farm! There is always work to do. The question is- Will I make any money this year? That is hard to answer.
– Doris K.
The Curse of Experience
I lost mine a couple of years ago and have only been able to get temporary contract work. My job was outsourced and, when you are older, employers sometimes assume you were laid off because you were no longer relevant when it was actually a "cost savings."
– Sharon P.
Be sure to answer next week's question: Do you think Apple can continue to thrive without CEO Steve Jobs? Why or why not? Are you bullish or bearish on Apple shares? Should the company be more open about its future, including sharing the plan for Jobs' successor?
Send your answers to firstname.lastname@example.org.!
Is there a topic you want to see covered as a "Question of the Week" feature? Then let us know by e-mailing Money Morning at email@example.com. Make sure to reference "question of the week suggestion" in the subject line. We reserve the right to edit responses for length, grammar and clarity.
Thanks to everyone who took the time to participate – via e-mail or by posting their comments directly on the Money Morning Web site.]
News and Related Story Links:
11 Signs the Job Market is Improving in 2011
- The Wall Street Journal:
Downturn's Ugly Trademark: Steep, Lasting Drop in Wages
December jobs report: Unemployment rate at 9.4%
- Money Morning:
No Rest for the Weary: Unemployment to Remain High Through 2011 and Beyond
- Money Morning News Archive:
Question of the Week Feature