One Man’s Opinion: Is The US Job Market Really Healing?

The latest non-farm payroll data shows the US economy added 155,000 jobs in December, and the unemployment rate remained unchanged at 7.8 percent, well short of the Fed’s stated target of 6.5 percent, which in turn will likely keep the central bank engaged in the foreseeable future.

Does the present administration have any number that relates to job losses if one of the worst-case scenarios, say sequestration kicks in in near future?

The government has said in the past that if middle-class tax-cuts were not extended, we would see a substantial hit to the economy, said Alan Krueger, chairman of the White House Council of Economic Advisers. Congress made substantial progress earlier in the week with the “tax pay relief” act, and middle-class families would not see a tax increase starting January 4, while those on long-term unemployment benefits will continue to receive those benefits, he added.

Substantial progress has been made on budget-deficit reduction as well; more than $737 billion in deficit-reduction over the next 10 years has been agreed upon. So overall significant progress has been made and if there had been no progress, the rise in taxes on the middle-class would have had a severe hit to the economy early in 2013, he noted.

Asked what needs to be done to accelerate the job growth, Alan said Friday’s job report is really a microcosm of what has been going on over the past couple of years now. The job market is gradually healing, and the sectors hard-hit by the financial crisis are kind of slowly digging their way out.

A lot of progress has been made in the housing market and though it has been a painful adjustment, prices have stabilized nationwide and have been growing for the first time in years, he noted. There has been a pick-up in home building which will help the economy going forward; Friday’s report showed 30 thousand construction jobs were added in December, Alan observed.

Improved confidence and certainty in the economy going forward will hold the key to accelerated job growth, he said. A step in that direction has already been made with the “tax pay relief” act even though not every issue has been addressed, he lamented.

But if Congress resolves this in a smoother fashion going forward, that will help, he added. Also, the President has consistently supported investments in infrastructure and education, the kind of things that would make the US more competitive in the future and create more opportunities. So those are the types of efforts that can be made to build on the progress that has been achieved over the past 34 months where five million private-sector jobs were added, he noted.

Asked to comment on the economic toll if negotiations over raising the debt-ceiling is prolonged, Alan said all we need to do is look at recent history and go back to August 2011 when confidence plunged and US’ credit rating was cut because some members of the Congress were playing Russian Roulette with the debt ceiling.

So it’s quite clear that the economy will do better if Congress does its job and does what it has routinely done historically, i.e. raising the debt limit without drama, he concluded.

You can watch the video here.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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