Joblessness Persists as Obama's Biggest Challenge

The unrelenting and epidemic unemployment that defied official efforts to fight it in 2010 now looms as the biggest problem confronting the Obama administration in 2011.

A deceptively significant drop in the December unemployment rate that made headlines this morning is at odds with the more distressing picture of the many millions of Americans who can't find work that is painted in the employment and payroll report released today by the Labor Department.

And though American businesses added 103,000 people to their payrolls last month, that pace of hiring remained at a level too weak to absorb the number of people entering the labor market or to make much of a difference for the more than 8.5 million people who lost their jobs in the recession.

Still, President Barack Obama -- who used the occasion to officially announce the appointment of Gene Sperling as his new chief economic adviser -- welcomed the new numbers as a sign that the tax incentives for hiring and investment he pushed through Congress last year are working.

"We know these numbers can bounce around from month to month, but the trend is clear," Obama told a crowd of cheering workers at the Thompson Creek Window Co. in Landover, Md., which credits such incentives for being able to increase its staff by 40 percent last year and plans more hiring for 2011.

"We saw 12 straight months of private-sector job growth. That's the first time that's been true since 2006," Obama added. "The economy added 1.3 million jobs last year, and each quarter was stronger than the previous quarter, which means that the pace of hiring is beginning to pick up."

Actually, total payroll employment increased by 1.1 million from December 2009, according to the Labor Department.

Moreover, the pace of hiring remains erratic -- the government revised the November payroll increase to 71,000 and the October bump to 210,000. And that pace is "barely enough to accommodate the normal increase in the labor force and, therefore, insufficient to materially reduce the unemployment rate," as Federal Reserve Chairman Ben Bernanke testified today before the Senate Budget Committee.

Bernanke said that, according to the predictions of most policy-makers at the Fed, "at this rate of improvement, it could take four to five more years for the job market to normalize fully."

The drop in the unemployment rate, to 9.4 percent from 9.8 percent in November, was due less to the growth in American jobs than to the continued flight of aspiring workers from the official labor force used to calculate the rate.

While some 14.5 million people were looking for jobs they couldn't find, 2.6 million more who wanted jobs had stopped looking and thus weren't counted as unemployed. Of those, a record 1.3 million were discouraged workers -- people not currently looking for work because they believe no jobs are available for them.

Perhaps more discouraging for economists was the slight increase to 6.4 million of the officially long-term unemployed who have been without a job for more than half a year. They make up more than 44 percent of the country's officially jobless, the same share as December 2009.

Long-term unemployment, Bernanke noted, "not only imposes exceptional hardships on the jobless and their families, but it also erodes the skills of those workers and may inflict lasting damage on their employment and earnings prospects."

Sperling, currently a top counselor to Treasury Secretary Timothy Geithner, resumes his Clinton administration role as director of the National Economic Council. Obama said the new director and others at the White House have "one focus, and that is making sure that we are duplicating the success of places like Thompson Creek all across the country."

The president called on small and mid-sized businesses across the country to follow Thompson Creek's example by taking advantage of the temporary tax breaks he helped enact last year.

"Companies who are listening out there: If you are planning or thinking about making investments some time in the future, make those investments now and you're going to save money," Obama said. "And that will help us grow the economy. It'll help you grow your business."

But with Republicans likely to oppose any new Obama policies aimed at spurring job creation, it remains unclear what moves the president and his newly shuffled staff can make to heal a still ailing employment market.