NEW YORK (TheStreet) -- The economy created only 74,000 jobs in December well below the 2013 average of 188,000. The Labor Department report that indicates stronger growth for the coming year, as predicted by many economists, may not materialize.
In 2013, growth slipped to 1.9% last year, thanks to the $200 billion January tax increase and sequestration spending cuts, and this is simply not enough to bring unemployment down to an acceptable level, support strong wage gains and reduce income inequality.
This report indicates that neither the economy, nor the job market have shifted into high gear as the White House and private economists who flack for the Administration have claimed.
Unemployment dropped to 6.7%, because 525,000 additional unemployed adults were discouraged and did not seek a job. Also, many prime working-age adults remain stuck in low-wage, part-time jobs with few or no benefits.
Factoring in those frustrated adults, the jobless rate rises to 13.1%. The economy needs to add about 365,000 jobs each month to push unemployment down to about 6% and provide those folks with decent-paying, full-time employment. 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% but much stronger growth is possible. During the Reagan recession of the early 1980s, unemployment peaked at a much higher level than during the recession Obama inherited, and GDP advanced at a 4.9% rate over the comparable period of recovery.
Slow growth and weak demand for labor are among the primary causes of wage stagnation, inequality and worsening conditions for families at the lower end of the income ladder. Retailers catering to those families, such as Family Dollar Stores, Sears and K-Mart, had weak holiday sales. In the year ahead, price cuts and even thinner margins will be necessary to sustain their sales as the outlook for their customers remains poor.