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Five reasons why the economy creates so few jobs

The Labor Department is expected to report that the economy added 200,000 jobs in November. That's in line with the average so far this year — 206,000 — but below the 2014 monthly pace of 260,000.

The unemployment rate is down to 5.0 percent from the recession high of 10 percent, largely because fewer adults are looking for work.



People fill out a form for job opportunities during the Miami Worldcenter construction job fair.
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People fill out a form for job opportunities during the Miami Worldcenter construction job fair.

Since the recovery began, GDP growth has averaged 2.1 percent and the economy has added 12.6 million jobs. Growth should pick up to 2.5 to 3 percent next year, but here are five reasons why jobs creation will still disappoint.


1. Frightened consumers

Household spending accounts for about two-thirds of the economy and right now, consumers are reluctant to spend.

Slow growth and instability in China and terrorist attacks in Europe don't help but the constant drumbeat from the White House that most Americans are victims of racism, sexism or the evil machinations of the top 1 percent doesn't boost optimism either.

In this dour environment, new home sales and construction, though improved, are not even half their pre-recession levels.

2. Strong dollar

Over the last two years, the dollar is up about 18 percent against the euro, yen and other currencies, making U.S. goods and services more expensive, boosting imports and curbing exports. Along with higher corporate taxes, that discourages investment in the United States.


3. Productivity growth

In 2015, many Obamacare mandates for small business kicked in and raised labor costs. Along with higher minimum wages in San Francisco and other cities, those have caused some small businesses to close and others to try to find cost cuts elsewhere.

During the early years of the recovery, businesses were reluctant to invest to improve worker productivity, and employment grew faster than economic growth warranted. However, since spring, productivity has picked up to about 2 percent — in line with the historical norm. This should support modestly better wage gains, but it does help explain the slower pace of jobs creation this year.

4. Myth of college graduate underemployment

Scores of college graduates work in jobs that historically did not require a degree, but many BAs may be well placed as Starbucks baristas. Tests administered by the Council for Aid to Education indicate 40 percent of recent graduates are not proficient in the basic problem-solving skills normally associated with a college education.

At the same time, many high paying blue-collar jobs in manufacturing and other technical areas go begging because community colleges do not enroll enough students in vocational programs.


5. Stranded rural workers

Urban areas have more than recovered all the jobs lost during the financial crisis, while employment outside of metro areas has lagged. And many rural workers cannot afford to relocate for $10 to $15 an hour jobs in restaurants, dry cleaners and health clubs catering to highly paid urban professionals.

Paradoxically, now the Obama administration is worried that the proliferation of state licensing requirements—often advocated by unions—discourages labor mobility, and that city zoning laws raise rents, curb labor mobility and exacerbate inequality.

More regulation to spread the wealth and accomplish fairness? Sometimes the cure is worse than the disease!


Commentary by Peter Morici, an economist and business professor at the University of Maryland, and a national columnist. Follow him on Twitter @pmorici1.