Economy Meanders, Adds Too Few Jobs

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet) -- The economy added only 80,000 jobs in October, disappointing forecasters who expected 95,000 to be added. The economy appears to be stuck in low gear, unable to reduce the ranks of the nearly 14 million unemployed.

Unemployment was down to 9.0% from 9.1% the previous month, a change that was not significant given that many adults remain on the sidelines, too discouraged to look for work.

Wholesale and retail trade, health care and social services, manufacturing, and leisure and hospitality added jobs, but telecommunications, banking and securities posted losses. Information technology gained and financial services lost positions in September, but both sectors posted losses for the entire third quarter reflecting broader layoffs with more ahead.

Government employment fell by 24,000 and private sector jobs added 104,000.

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Jobs creation will remain inadequate to keep unemployment from falling in the months ahead, especially considering the mass layoffs recently announced, as a result of cost cutting by many large multinationals. More hospitable exchange-rate and regulatory environments abroad continue to encourage outsourcing.

Such weak jobs growth is inadequate to appreciably dent unemployment -- at least 130,000 jobs are needed each month to keep up with growth in the adult population. Many adults are sitting on the sidelines and not looking for work, and are not counted among the unemployed.

Factoring in those discouraged adults and others working part time for lack of full-time opportunities, the unemployment rate is about 16.2%. Adding college graduates in low-skill positions, like counterwork at Starbucks, and underemployment is even higher.

The economy must add 13.3 million jobs over the next three years -- 368,000 each month -- to bring unemployment down to 6%. Considering continuing layoffs at state and local governments and federal spending cuts, private sector jobs must increase about 400,000 a month to accomplish that goal.

Growth in the range of 4% to 5% is needed to get unemployment down to 6% over the next several years. In 2011, the economy has been growing at about 2%, and that pace is expected to continue through next year.