ALFREDO ORTIZ: December Jobs Report Is Cold Comfort For Main Street America

Friday’s jobs report shows topline job creation in December surprised to the upside, but as usual, a deeper dive into the numbers shows the labor market is far weaker than it appears.

Start with the downward revision of 71,000 jobs in October and November, marking the 10th time in the past 11 months that job creation has been revised downward. Taking this downward revision into account, the December jobs report doesn’t beat expectations but fails to meet them. Expect December job creation to similarly be revised down next month in a continuation of this trend.

Then there’s the fact that job growth last month occurred disproportionately in unproductive government jobs, continuing the 2023 trend. Monthly government jobs increased by an average of 56,000 in 2023, more than twice as fast as in 2022. Many of these government jobs are new IRS agents hired to harass productive small business owners.

More than half of last month’s new jobs came in government or quasi-government healthcare and social assistance jobs. In 2023, nearly 60% of the 2.7 million new jobs came in these sectors. As Alyssia Finley at the Wall Street Journal points out, in some blue states, such as New York, Illinois, and Michigan, job growth in these sectors made up more than 100% of net new jobs as job creation in the rest of the real economy declined. She aptly calls it the “welfare-industrial complex.”

While the unemployment rate remains low, nearly 700,000 Americans left the labor force altogether last month. The number of full-time workers plunged by 1.5 million, and the number of multiple jobholders increased to a record high as more Americans have to work additional jobs to make ends meet with today’s high cost of living. Real wages continue to stagnate, growing at about the same rate as core inflation.

This more detailed picture of the labor market reflects the struggles facing small businesses, which create nearly two-thirds of all new jobs. Jerald Sulky, a 125-year-old Iowa manufacturer of horse-drawn vehicles, recently was forced to close its doors due to a lack of consumer demand. “The fun money that small businesses rely on has been sucked out of the economy,” owner Erik Lee explained to me. With price levels up by nearly 20% since President Biden took office, it’s no surprise that consumers are forced to transfer discretionary income to pay for necessities.

In San Antonio, the restaurant Sangria on the Burg also recently closed its doors due to higher costs and lower sales. Owner Ceasar Zepeda said his is just one of many restaurants catering to the middle class that is closing down in this climate where eating out is becoming a luxury. Marketplace recently reported that small business closures continue at a steady pace. “It seems like every business that’s closed down has its own story,” it reports, “whether they couldn’t make rent or get enough customers back in the door.” This is the Main Street reality in the Biden economy.

Consumer credit card debt has been propping up the economy and labor market, reaching a record $1.2 trillion. But high interest rates and low credit scores mean there’s a limit to how much debt consumers can incur. As credit dries up, so will remaining discretionary income, reducing consumer demand, and preventing small businesses from creating jobs. Then, the topline job numbers will reflect the economic reality that’s going on under the surface.