Why 7.7% Is No Reason to Celebrate

Photographer: Peter Foley/Bloomberg

Jack Welch, speaks with Betty Liu from Bloomberg Television.

When the unemployment rate dipped below 8 percent in October, skeptics like former General Electric Co. chief executive Jack Welch alleged that the books must have been cooked. The less conspiracy-minded asked if it was a statistical aberration.

Today’s unemployment report puts the headline rate at 7.7%.  It looks more and more like the jobs picture really is improving (loyal readers of The Market Now might remember that just a couple of days ago TMN said that if productivity was rising, employment was likely to follow). The question this raises is why so many folks don’t really feel like things are getting better.

It’s not just Jack Welch who doesn’t feel like he sees a recovery. Even as hiring rises, consumer confidence falls. There are a few possible explanations. One is that we’re still stuck in a recession narrative. Maybe the perception just hasn’t caught up to the positive economic news.

The other, more worrisome, possibility here is that the unemployment number alone may mean less than what it used to. A data point worth considering is that while unemployment is down, consumer spending isn’t rising as fast as you might expect.

Today’s labor news gives a hint of why not: Wages are still flat, and average earnings in the private sector actually slipped slightly since September from $814.20 to $812.87. They’ve risen less than inflation in the last year. Jobs are being created, but the question that still hangs over the economy is whether enough of them are high-paying, high-quality jobs that will boost confidence.

A version of this post appeared earlier in the Market Now newsletter. Click here to register at Bloomberg.com and subscribe to The Market Now daily email.

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