Five Reasons Job Creation Disappoints, Despite Uptick

SMITH BRAIN TRUST -- The ADP National Employment Report shows a private-sector increase of 217,000 jobs in November 2015, indicating a pace “twice that needed to absorb growth in the working age population” and signals the “economy is fast approaching full employment and will be there no later than next summer,” according to Moody’s Analytics’ chief economist via Reuters. The latest figures, including the Department of Labor's 211,000 overall total, also appear to support an anticipated interest rate hike when the Federal Reserve Board of Governors meets Dec. 15-16.

But professor Peter Morici in the University of Maryland’s Robert H. Smith School of Business says the economy has underperformed in terms job creation. Prior to the November report, this year’s monthly pace of 206,000 added jobs lagged behind 260,000 in 2014. In addition, he says, fewer job-seeking adults contributes largely to the 5 percent unemployment rate. And even though GDP should climb from 2.1 percent in 2015 to as high as 3 percent next year, Morici writes at CNBC that five factors will continue to hamper job creation:

1. Frightened consumers: New home sales and construction are less than half their pre-recession levels, and consumers more broadly are reluctant to spend during a period marked by global market volatility, terrorist attacks and political noise about domestic “racism, sexism or the evil machinations of the top 1 percent.” 

2. Strong dollar: The dollar’s 18 percent rise over other currencies is curbing U.S. exports and discouraging investment in the United States.

3. Productivity growth: This year’s Obamacare mandates and minimum wage hikes in some cities have hampered small business, following post-recession reluctance in this sector to invest to improve worker productivity.

4. Myth of college graduate underemployment: The Council for Aid to Education recently found 40 percent of graduating college students lack complex reasoning skills for white collar work. Meanwhile high-paying blue collar jobs “go begging because community colleges do not enroll enough students in vocational programs,” Morici says.

5. Stranded rural workers: Lagging, post-recession employment persists outside metro areas , and many rural workers “cannot afford to relocate for $10 to $15 an hour jobs in restaurants, dry cleaners and health clubs catering to highly paid urban professionals,” Morici says.

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