Of the three major economic and financial developments of the past week, two could be viewed positively, while one falls into the "wait and see" camp.
First up, American job creation was better than expected during the month of October. In addition, employment data of the two prior months was revised to be less ugly.
Second, political change in the U.S. Congress was also an important step to getting the federal government under control.
Finally, the Federal Reserve's announcement of another $600 billion in U.S. Treasury security purchases could modestly help the economy … it could also backfire.
The American economy added 151,000 net new jobs during October, substantially better than the 68,000 net gain expected. Just as positive was the substantial revision to data of the two prior months, suggesting that 110,000 fewer jobs were lost.
The nation's unemployment rate remained at 9.6 percent for the third consecutive month. The rate will likely decline in a most stubborn fashion during the next 12-24 months … and could actually rise for a time as better economic news entices hundreds of thousands of people back into the labor force.
No doubt the Obama administration and the Democratic congressional leadership wished the more positive jobs data could have been available before the elections. After all, heading into an election with four consecutive months of painful job losses — and a near double-digit unemployment rate despite massive government stimulus — did not exactly endear administration and congressional performance to voters.
I would argue that one major reason employment data was better than expected in October was the rising and widespread expectation that the Democrats were in serious trouble, with heightened optimism that Republican control of the U.S. House of Representatives, and possibly of the U.S. Senate, could help derail or slow the government juggernaut unleashed over the past two years
I would also argue that employment data of recent months would have been even worse if the current Democratic leadership in the House had been widely expected to remain in power
This is NOT a strong testament to Republican politics. It is a testament to split government and a means to hopefully address projected $1 trillion annual budget deficits for years to come, a massive borrowing binge that could ultimately move this nation toward financial peril.
The employment data was clearly better than in earlier months. However, it needs to continue to improve in a major way to address the millions of still unemployed people, as well as those distressed workers on the edge of financial ruin.
As noted ad nauseam, the U.S. economy needs to add 130,000 jobs monthly just to keep the unemployed rate unchanged … just to meet the needs of a rising population and a rising labor force. Consistent net job gains monthly in the 250,000-400,000 range will be needed to make any sizable dent in the nation's 9.6 percent unemployment rate, still near the highest level in 30 years.
Don't hold your breath
The seismic shift of at least 60 seats in the House of Representatives from Democratic control to Republican control was primarily a vote against the government expansionary policies of President Obama and the congressional leadership. It was much less a vote of confidence in Republicans.
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