Fisher Investments Editorial Staff
US Economy, Media Hype/Myths

Help Wanted?

By, 03/03/2011

Story Highlights:

  • Private sector employers added 217,000 jobs last month, outstripping expectations.
  • While unemployment numbers in the US and globally have some decrying a “jobless recovery,” the fact is they’re improving.
  • Looking at state or national numbers provides a different perspective on unemployment.
  • Any way you slice it, unemployment traditionally lags economic recovery and tells very little about the future direction of global economies.


Unemployment numbers made headlines again Wednesday as private employers exceeded expectations, adding 217,000 jobs in February—the fifth straight month of gains. Now, in the US, ADP numbers have not recently translated into big gains in the popularly followed monthly BLS estimates because of differences in the way the BLS and ADP measure unemployment (yet another reason unemployment rates are not particularly useful in forecasting future broader economic health). 

Fact is, the employment situation is improving. No, 9% unemployment doesn’t seem great on its face, but it’s still down from its 10.1% peak in October 2009 and down from 9.4% in December. This likely isn’t a fast or big enough improvement for politicians and pundits who (as they always do) bemoan a domestic “jobless recovery.” But what they fail to notice is it’s the same story globally—and globally, employment is improving. Still-elevated eurozone unemployment dropped below 10% for the first time since July 2010, and broader European Union (EU) unemployment (consisting of 27 nations, including Britain and Poland) stands at 9.5%, down from 9.6% the previous month. But focusing exclusively on these broad rates creates too homogenous a picture of unemployment. Consider the following European trends: 

  • German unemployment continues to fall and is at its lowest point since reunification.
  • Spanish unemployment—the highest in the EU—also seems to have peaked and is starting to trend downward.
  • France has fallen to 9.6% from a peak of 10.0%.
  • Italy has held stable at 8.6% for three consecutive months.

What’s more, a look at the US on a state-by-state basis is similarly revealing:

  • Twenty states reported unemployment rate increases in December 2010—but 15 states and Washington, D.C. recorded decreases, and 15 states saw no change.
  • North Dakota(3.8%),South Dakota (4.6%), Nebraska (4.4%), and New Hampshire (5.5%) are among the states with rates quite low relative to historical averages.

What to take away from these regional and national divergences? It’s not just aggregate unemployment numbers that matter because there’s known friction in employment, meaning employment rates can differ—even greatly—among states or nations as local economic conditions warrant. Which means there are areas of the US arguably experiencing quite strong employment on the back of healthy economies. Consider North Dakota, where a growing local economy (and massive innovation in the Energy sector) has led to a tight labor market. Contrast that to the more publicized case of California, where a decidedly unfriendly business environment has discouraged hiring and unemployment is markedly above the national figure. (Its 12.5% unemployment is the second worst in the nation!) Sure, folks may find it difficult (or undesirable) to move to North Dakota (Fargo!) or Nebraska for a job, but they certainly prove the US economy is hardly grinding to a halt. 

Also, there’s little evidence there’s some “right” unemployment rate—where “enough” people are employed and the economy grows in a nicely straight line. Consider Japan, where historically lower unemployment numbers than the US haven’t translated to anywhere near US growth levels. 

As we’ve said, employment traditionally lags economic recovery—and will this time. Unemployment appears to be headed in the right direction overall, but that alone won’t determine the direction of the global or national economy (though politicians will tell you otherwise). While the economy doesn’t need big employment gains to grow, an improving picture could provide something of a US-related sentiment boost—and we do think the US outperforms its EU peers this year. Meanwhile, the developed world’s headline unemployment rate likely remains historically elevated this year—and it won’t hold back growth.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.


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