National unemployment rate drops as thousands give up job search

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Six years after the start of the Great Recession -- and 4 1/2 years from its official end -- the nation still has not recovered the number of jobs lost in the downturn.

Friday's report on the national employment situation from the Bureau of Labor Statistics didn't describe just another lackluster month of job gains barely keeping up with population growth. It painted a picture of a nation where people are still struggling to find work and many are dropping out of the labor force entirely, even as Congress fights over whether to reauthorize emergency unemployment compensation for the long-term jobless.

The unemployment rate dropped from 7 percent in November to 6.7 percent in December, but that was almost entirely because 347,000 people who had been looking for work gave up. Employers created 74,000 jobs, well below the 200,000 that economists had been expecting to see.

Wall Street started the day up slightly but ended mixed with the Dow Jones industrial average closing at 16,437.05, down slightly by 7.71 points or 0.05 percent; the Standard & Poor's 500 Index closing at 1,842.37, up 4.24 points or 0.23 percent; and the Nasdaq closing up at 4,174.66, a 18.47-point increase or 0.44 percent.

Heidi Shierholz, an economist for the Economic Policy Institute in Washington, D.C., was surprised by the report initially. "At first look, it was just shocking with the huge drop in unemployment but just 74,000 jobs added."

Then, she saw the drop in the unemployment rate was a result of people dropping out of the labor force.

In just the past year, as the population of potential workers rose by nearly 2.4 million, the labor force has contracted by 548,000. The number of people who are not participating in the labor force has grown by 2.9 million.

There were 10.3 million people unemployed in December, 1.9 million fewer than last year and 490,000 fewer than last month.

Taking a longer view, in the six years since the start of the recession, the nation's population has grown by 13.8 million while the labor force -- defined as those who are either working or looking for work -- has grown by 1.02 million.

Given the number of expected retirements of baby boomers, Ms. Shierholz said, there seem to be about 6 million people who would normally be in the workforce, but aren't.

Certainly, they may be discouraged by the number of jobs available. The nation has 1.2 million fewer jobs now than it did at the start of the recession. That's based on the calculation that 8.7 million net jobs were lost in the recession, and the country has added 7.5 million back.

December's 74,000 new jobs makes that month the worst for job creation since January 2011 when 69,000 jobs were added. Bad weather gets some of the blame for the job news, said Paul Edelstein, an economist with IHS Global Insight in Lexington, Mass.

The report Friday was unveiled against a backdrop in Washington, D.C., of a congressional fight over whether to reauthorize emergency unemployment benefits to the long-term unemployed.

Labor Secretary Thomas Perez urged Congress to renew extended unemployment compensation: "It's the right thing to do to extend a lifeline to fellow Americans down on their luck, and it's the smart thing to do to stimulate the economy."

Nearly 3.9 million of the 10.3 million people who are unemployed have been without a job for more than six months. While many of them do not qualify for compensation, 1.3 million immediately lost their unemployment benefits when the authorization for extended benefits expired on Dec. 28.

"It's more critical than ever for Congress to quit dawdling and pass an extension of unemployment insurance immediately," Thea Lee, the deputy chief of staff at the organized labor group AFL-CIO said in a released statement. "It's a disgrace that 1.3 million Americans lost benefits at the end of the December while too many Republicans in Congress remain fixated on irrelevant and counterproductive austerity measures."

Christine L. Owens, the executive director of the National Employment Law Project in New York City, also issued a statement calling for Congress to restore benefits to the long-term unemployed.

Breaking down the numbers further, private employers added 87,000 jobs in December, while government employment saw a net decrease of 13,000 jobs. Local public schools cut 14,900 jobs last month.

The public schools have cut 276,000 jobs since the start of the recession six years ago. Employment in local governments, excluding the schools, was up by 5,500 jobs in December, but remains down by a net 127,500 in the past six years.

Retailers added 55,300 jobs, with another 15,400 positions added by wholesale businesses. Manufacturing employment was up by 9,000 with 3,500 workers in primary metal manufacturing, such as steel and aluminum.

Health care cut 6,000 jobs with 2,400 jobs lost at hospitals.

Construction companies, which typically cut jobs in the winter, sliced 16,000 jobs in December.

Ann Belser: or 412-263-1699.

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