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Morici: Despite 203,000 New Jobs, Problems in the Economy Remain

NEW YORK (TheStreet) -- The Labor Department reported the economy added 203,000 jobs in November, continuing the progress of recent months. Overall, the economy should be stronger in 2014, permitting the Federal Reserve to ease back on monthly bond purchases and let longer-term interest rates rise modestly.

The unemployment rate fell to 7%, mostly because furloughed government workers returned to their jobs.

With third-quarter GDP growth at 3.6%, businesses should be adding more jobs but much of that growth was from additions to business inventories as consumers remain tightfisted and goods stay on the shelves. Overall consumer demand contributed about one percentage point to growth, whereas inventories accounted for 1.7%.

Major apparel retailers report huge stocks of unsold goods entering the final weeks of holiday shopping. More broadly, Black Friday weekend disappointed  expectations for stronger sales than last year. These indicate much slower fourth-quarter growth as businesses slow purchases and retailers trim headcount more than usual in January.

Auto sales and rising home values remain a bright spot. With the uncertainty of new U.S. military activity in the Middle East and another government shutdown receding, consumers' confidence should strengthen through December and into the New Year.

Overall growth will be between 1% and 2% in the fourth quarter and then strengthen to 2.5% to 3% in 2014. However, hiring will likely continue at its present pace or improve only moderately. Good paying full-time jobs will continue to be scarce.

Overall, jobs creation is well short of the 365,000 needed each month to reduce unemployment to 6% over a period of two or three years, but that would require GDP growth in the range of 4% to 5%. Over the last four years, the pace has been a paltry 2.3%.

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