Today, the Department of Labor reported that 570,000 Americans filed initial claims for jobless benefits last week. This follows news from ADP Employer Services on Wednesday that private employers cut 298,000 jobs last month. As bad as these numbers sound (and they are bad) the real threat facing our nation’s economy is that, as Gallup’s Chief Economist Dennis Jacobe puts it: “job creation in August is just not taking place in the U.S. economy.” Why is job creation more important than job loss numbers? Heritage fellow James Sherk explains:
The American economy is highly dynamic. Industries continually expand and contract while entrepreneurs create new companies and uncompetitive firms go out of business. Workers move between jobs frequently as this occurs. … Recent research shows that an increased likelihood of layoffs is not the main reason that unemployment rises during economic slumps. … The main reason unemployment rises during economic downturns is that job creation falls while the labor force continues to grow, making available jobs scarcer. As a result, many without work stay unemployed longer, driving up the unemployment rate.