U.S. Economy Delivers Best Jobs

¶ … U.S. economy delivers best jobs number since the recession began, buoying markets" reflects important details about the evolution of the U.S. economy, the impact that those evolutions in a certain element important from an economic perspective can have on some of the other economic variables and, in the end, on the evolution of the economy as a whole.

The article starts by mentioning a statistical fact: the Bureau of Labor and Statistics has reported at the beginning of December that only 11,000 jobs were lost during the month of November. According to several experts, this is a positive aspect because several reasons that will be analyzed further below, all based on economic principles. At the same time, the fact that fewer number of jobs were lost in November also triggered a positive boost on the market, represented by increases in the Dow Jones and S&P 500 Index. Finally, the article, while resuming some of the job figures of September and November, concludes briefly on some of the consequences of the economic realities today.

There are thus three main economic principles that will be discussed here and to which the article refers. The first index is the job creation index, which was -11,000 in November, as compared to -111,000 in October and -139,000 in September. The job creation index shows the monthly number of new jobs that the economy has created and is usually reported in the month that just started for the previous month. The job creation index is usually a positive index, because, as the economy expands, more jobs are needed to keep up with this expansion and companies will hire more and more individuals in order to continue developing and increasing their business.

However, because of the current economic crisis, this figure is and has been negative for the past months. The negative job creation index means that the economy is no longer creating new jobs, but rather reducing on some of the existing ones. The phenomenon is thus the reverse one: as the economy contracts, companies can no longer expand their businesses and have to cut in their workforce in order to reduce costs, notably here labor -- related costs.

However, the job creation index is also seen from a temporal perspective. While the figure is still a negative one, there are still two positive elements in the way the job creation index has evolved. The negative curve of the job creation index has become less steep than in the previous couple of months. At the same time, the job creation index is getting close to 0.

There are several conclusions that can be drawn from these figures. First of all, the job creation index has become almost positive once more. This means that, after a long time, the economy is almost at the point where it will start requiring new jobs. In other words, the companies, part of the U.S. economy, will soon be required (at an aggregate level) to hire new employees because their business will start to expand once more.

Second of all, at an aggregate level, the effect is that the economy is coming out of the recession. The job creation index is perhaps the index that first gives such a signal to an economy that is in recession. Following the rationale previously presented, if the economy starts producing new jobs, it means that the businesses need more jobs because the business is expanding. While the article does not explicitly mention it, this in fact produces an impact on another index that reflects the direction in which the economy is going: the GDP index. The increased job creation index in November 2009 shows that the GDP will increase as well in the future, also reflecting the fact that the U.S. economy is coming out of the recession.

It is also important to mention another index that the article touches upon: the overall unemployment rate. The unemployment rate has also decreased from 10.2% in October to 10% in November. While the drop may not seem that big, it should also be compared to some of the unemployment rates in other countries, such as the UK, where the unemployment rate is more than 15%.

The decrease in the unemployment rate is a logical consequence of the fact that the job creation index has increased. However, the decrease in the unemployment rate is perhaps also a good indication of the fact that the overall standard of living is starting to rise again and that the positive effects that the economy has encountered in the last couple of months have begun to trickle down to the population. The fact that more people are employed also means that more people are receiving a monthly wage, which will, in turn, encourage a growth of the aggregate demand at national level, thus further helping the economy.

The third category of indices that are important in the article are the stock market indices. The job creation index has created a feeling of optimism among the investors on the stock exchange, which was reflected in the two stock indices presented here, the Dow Jones Industrial Average and the S&P 500. Both have increased during the early morning trading, with 1.5% and 1.7%, as a reflection of the fact that the market has acknowledged the results of the labor market and interpreted them as well as the economy exiting recession.

There is a longer discussion worth having around the stock market indices. The current economic recession initially started as a financial crisis and, as the crisis evolved, many investors pulled their money out of the stock market, aiming for safer investments. However, despite the negative feeling surrounding Wall Street at this point, with many attributing the blame for the crisis to the excesses that Wall Street proposed and supported, the fact that the stock market is starting to rebound can only be a reason of happiness, since a healthy economy also has a strong stock market.

So, the fact that the stock market has responded to the positive figures means that the investors are willing to take risks once more, although hopefully not to the degree to which this happened in the past. Taking risks means that they are also willing to invest into the economy, creating more jobs and encouraging a positive spiral evolution that can only be positive.

The end of the article presents some short statements by President Obama, who has pointed out that the Administration is not willing to "hang back and hope for the best when we've see the kinds of job losses that we've seen over the last year" and that "despite the progress we've made, many businesses are still skittish about hiring." These two statements show that the U.S. administration will continue its massive effort in terms of governmental intervention to ensure that the trend continues and that the United States economy will indeed exit the recession.

The governmental intervention has basically manifested itself through increased governmental spending that was aimed at rescuing some of the key sectors of the U.S. economy, such as the financial sector and the automotive producers. Some of the public did not see this as a positive step by the government. However, governmental spending in the financial and banking sector, much affected by the crisis, meant that these financial institutions could gradually restart giving out loans to the business on the market, thus triggering a rebound of the economy overall. From this perspective, governmental spending is tied into indices such as the employment rate, the job creation index and the GDP.

So, the article leads the reader to believe, following President Obama's declarations, that the trend is going to continue in terms of governmental spending into the U.S. economy, especially since this is actually producing results, as the article shows. The spending may go into the same sectors until now, although one should also note that the healthcare sector may also be one of the targets of governmental spending, most notably after the debates surrounding healthcare and the Administration's plan to provide a more generous and universal form of coverage. With that said, the figures have also reflected this trend: the article mentions that the healthcare industry has already started to create new jobs, so the job creation index is already positive for this industry in November 2009. i

The fact that the U.S. economy is already exiting the economic recession is also a good sign for the economy at a global level. As the biggest economy in the world, the U.S. economy is also the most important and active player in the world economy. The fact that its economy is starting to perform better will encourage many of its economic and commercial partners.

Exiting the recession, creating new jobs (although that is not occurring yet) means that the aggregate demand at the level of the U.S. market is also increasing. This means that the capacity of absorption for the U.S. market is increasing. The U.S. commercial partners will be ready to increase their exports to the U.S., as they now have the guarantee that the U.S. market is ready to receive and purchase their products.