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Job Growth Surges, but Unemployment Rate Creeps Higher

By Michael Rainey
Friday, December 6, 2024

Happy Friday! The drama surrounding President-elect Donald Trump’s nomination of Fox News host Pete Hegseth to lead the Defense Department continued on Capitol Hill today, with Vice President-elect JD Vance vowing to stand by the controversial nominee. “We’re not abandoning this nomination,” Vance told reporters, adding that Hegseth “is going to get his hearing before the Senate Armed Services Committee, not a sham hearing before the American media.”

Meanwhile, House Republicans met to hash out their strategy for the reconciliation bill they plan to pass early next year. Senate leaders plan to break up the bill into two parts, but many lawmakers in the House want to put their whole agenda into one massive bill. No progress was reported on that front Friday. “That dance is going to go on for quite a while,” Rep. David Schweikert said.

Here’s what else we’re watching.

Job Growth Surges, Unemployment Rate Creeps Higher

The U.S. economy added 227,000 jobs in November, the Department of Labor reported Friday, as the labor market rebounded from severe storms and a major strike the month before. Estimates for job growth in recent months were revised higher, as well, adding 56,000 new jobs to the tally for the previous two months.

At the same time, the unemployment rate ticked higher by a tenth of a point, rising to 4.2%. And although wage growth was strong, with incomes growing a higher-than-expected 0.4% on a monthly basis and 4% on an annual basis, it is taking workers more time to find a new job if they lose their old one, as the number of people unemployed for at least 27 weeks jumped to the highest level in nearly three years.

Sectors with significant job growth in November included health care (54,000), leisure and hospitality (53,000), government (33,000) and transportation equipment manufacturing (32,000). Retail lost 28,000 jobs, while employment held basically steady in construction, oil and gas extraction, transportation and warehousing, information services, financial activities, and professional and business services.

What the report is telling us: Overall, the report provides more evidence that the labor market is holding steady, in an economy that has largely recovered from pandemic-era inflation without falling into a recession. “I don’t want to say that we’ve definitely achieved a soft landing,” Gus Faucher, chief economist at the PNC Financial Services Group, told The New York Times, “but certainly we think this is what a soft landing looks like.”

RSM chief economist Joseph Brusuelas said in a research note that looking at the trendline, the pace of hiring appears to be averaging 150,000 jobs per month, which is about what you’d expect to see in an economy at full employment. “From our vantage point, this data speaks to a remarkable stability across the labor force even as finding a job is becoming a bit more difficult,” Brusuelas wrote.

As for the Federal Reserve, which will review its interest rate policy at its next meeting later this month, the latest jobs data is not being seen as an impediment to another rate cut. “The labor market is in a sweet spot and the Fed wants to keep it there, so that would give them enough ammunition to cut in December,” said Stephen Juneau, U.S. economist at Bank of America, per Bloomberg. “But we do think it still depends on the inflation data.”

Quote of the Day: Doubting the DOGE

“We keep pretending the federal budget is like sitting at the kitchen table, figuring out the family’s finances. That’s a lie … It’s a fifth of the economy, and it’s very, very difficult to manage and to restructure.”

— Douglas Holtz-Eakin, who served as budget chief under President George W. Bush and now leads the conservative think tank American Action Forum, speaking to CNN about the DOGE cost-cutting effort led by Elon Musk and Vivek Ramaswamy.

Holtz-Eakin noted that there have been many efforts to trim the federal government in the past, including the Grace Commission during the Reagan administration. “You can’t find any evidence that they changed the growth of the government one iota,” he said. “I think you should ask Elon and Vivek what makes them different than the Grace Commission. How are they different than other things that were unsuccessful?”

Moody’s Analytics chief economist Mark Zandi said he, too, is skeptical about the grand claims being made by Musk and Ramaswamy. Musk says he can cut $2 trillion from the federal budget, but Zandi said he’d be surprised to see the DOGE duo find even 10% of that to cut. “I’m all for efforts to improve the efficiency of government,” he said. “But there’s no game-changing 60-yard touchdown pass here. It will be a lot of one- or two-yard runs.”

Millions Would Lose Health Coverage if ACA Subsidies Expire: CBO

A massive legislative response to the Covid-19 pandemic, the $1.9 trillion American Rescue Plan Act signed into law by President Joe Biden in 2021 included more generous subsidies for those who get their health insurance through the Affordable Care Act, part of an effort to ensure that more Americans have access to healthcare. Those subsidies were extended through 2025 by the Inflation Reduction Act, and Democrats are pushing to extend those subsidies for at least another year in the current budget negotiations. It’s not clear, however, whether Republicans will be interested in providing extra funding for a program they widely deride as Obamacare, and a new analysis from the Congressional Budget Office shows just how costly GOP opposition could be.

According to a CBO analysis released this week, the failure to extend the ACA subsidies would cause 2.2 million people to go without insurance in 2026. That number would rise to 3.7 million in 2027, while averaging 3.8 million annually from 2026 to 2034.

The increase in the net cost for ACA plans will result in healthier people leaving the system, putting additional upward pressure on premiums as the patient population gets sicker on average, CBO said. “Without a permanent extension, CBO estimates, gross benchmark premiums will increase by 4.3 percent in 2026, by 7.7 percent in 2027, and by 7.9 percent, on average, over the 2026-2034 period,” the analysis said.

The CBO report, written in response to a query by Democratic lawmakers, comes on the heels of a separate analysis by the nonpartisan policy research group KFF of potential coverage losses in the Medicaid system. KFF found that if a Republican-controlled Congress were to roll back the generous subsidies that were offered to states under the Affordable Care Act to encourage them to expand their Medicaid systems, more than 3 million people would likely lose their health coverage. While all states could see losses, the problem is particularly acute for nine states – Arizona, Arkansas, Illinois, Indiana, Montana, New Hampshire, North Carolina, Utah and Virginia – that have laws on the books that require them to end Medicaid expansion if federal subsidies fall below a certain level.

For more on the KFF analysis, see this writeup by Phil Galewitz of KFF Health News.

Chart of the Day

Americans have a lot of complaints about the state of the healthcare system, and things appear to be getting worse. A new survey from Gallup shows that less than half of poll respondents (44%) say that American healthcare is excellent or good, and only 28% say that healthcare coverage is excellent or good.

“Americans' positive rating of the quality of healthcare in the U.S. is now at its lowest point in Gallup’s trend dating back to 2001,” Gallup said.

When it comes to cost, attitudes are even more negative, with just 19% of respondents saying they are satisfied with the cost of healthcare. Asked what the most important problem facing the health care system is, the number one answer was cost, which was cited by 23% of respondents, followed by access (14%) and obesity (13%).

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