The Achilles Heel(s) of Job Creation in 2011

ADP has released its January payroll data today, showing an estimated addition of 187,000 private sector jobs. The usual suspects are forecasting that this Friday’s Labor Department employment number for January will be 140,000. Neither of these numbers shows anywhere near adequate job growth, but it is some growth (provided the Labor estimates hold up).

At the end of last year, David Leonhardt did a great Economic Year In Review (with good graphics) recapping how far (or not) the economy had come. There is a trend in one graph that I think will stay the same this year:

Look at the trend in public sector employment. 2010 saw a marked decline in public sector employment and given the multiple budget crises at state, county and municipal levels throughout he US, this decline probably accelerates this year. These newly unemployed go right to the unemployment statistics as it is unlikely that the private sector will be creating jobs fast enough to adsorb this new wave of people without jobs. But look at it again — over the last year of the Obama Administration it is the public sector that is shedding jobs, which is a damned odd bit of socialism, right? But also look at the pace of the private sector growth — still anemic *in spite* of cutting back of all of this government. Demonstrating that the problem we face is definitely NOT the government crowding out the private sector. As long as there are so many unemployed Americans, layoffs from government jobs won’t be an addition to the economy.

The other achilles heel — market demand. Even though the retail numbers for the end of the year were quite good (and January is looking good, too) , no one knows yet how sustained this demand will be. Business demand has been up, prompting people to think that businesses may start to spend some of their cash on goods and infrastructure. But businesses got a great deal of productivity out of their people and plant over the last couple of years and it just isn’t clear how much uncertainty workers are factoring in before making buying decisions. What is true is that we aren’t going on a big enough spending spree to boost this economy’s GDP to its potential any time soon. Which is a big reason to pay attention to Obama’s efforts to jump start the alternative energy sector. This is genuinely a place where there is big room to jump into a market that could not only produce alot of jobs stateside, but provide greater opportunities for exports.