employment unemploymentInvestors are starting to get more confident about the outlook for the U.S. economy. Risky assets like stocks, for example, are seeing renewed interest.

But the painful unemployment situation in the country continues to hold center stage. The Republican Party registered big midterm election gains from an electorate frustrated by a lack of progress on jobs, among other things. And the Fed announced more measures to drive down interest rates in an effort to further boost the economy and increase hiring on Wednesday.

When it comes to tackling joblessness, there is plenty of vitriol and hyperbole on both sides of the political spectrum. To some pundits on the left, it's a shame that the Federal Reserve isn't providing more liquidity to prop up the economy. Tea Party activists on the right, meanwhile, rant about how government meddling is stopping businesses from hiring.

Need for a Comprehensive Approach

Investors, though, should take a more balanced approach. Chatter about a jobless recovery may be loud – understandably, given the soaring rates of unemployment – but it has been that way at the start of both recoveries over the last two decades. Signs of job creation are appearing nonetheless.

Yet comparisons to a bygone golden era for American labor characterized by abundant and well paying jobs is both fruitless and counterproductive. Technological automation and the rapid rise of low wage labor pools in an increasingly global economy are putting increasing pressure on the workforce.

And while a laissez-faire spirit seems to be ruling the country, an engaged and constructive industrial policy will be needed to maintain the high standard of living Americans are accustomed to.

The German economy, where unemployment is now at 18-year lows thanks to booming emerging market demand and carefully crafted policy that has allowed a high end manufacturing sector to thrive, provides many useful lessons. Not least, the German case suggests that the overall economy benefits when labor has a strong voice in corporate planning.

Signs of Growth in the U.S.

Even at home, though, there are signs of a turn. Markets are focused on October's jobs report out on Friday, where consensus numbers among economists are predicting gains of 60,000 private sector jobs. But investors could be in for a pleasant surprise.

A closely watched survey of employment by ADP (ADP) released Wednesday showed that the private sector added 43,000 jobs in October -- nearly twice as strong as economists had forecast. (Given variations in sampling and methodology, an apples to apples comparison between the absolute numbers in the ADP and government reports isn't as important as directional trends.) ADP took a cautious stance for the coming months and warned that sluggish GDP growth in the U.S. could provide a strong headwind for job creation. But as profits boom, businesses are likely to be driven more by their near term confidence than the overall pace of GDP expansion.

And few things inspire confidence like a sustained rally in the stock market. Employment surged in the months prior to April earlier this year, for example, in the wake of a major move up for stocks.

Fears about a European debt crisis over the summer, though, tanked investor confidence. Bearish hedge fund managers predicted that China was on the verge of a bust. Hiring slowed as chatter about the chances of a double dip recession in the U.S. and comparisons to Japan's deflationary malaise grew.

But stock markets have staged an impressive rally over the last few months and business confidence is also mending. Catastrophic scenarios from a chain of sovereign defaults in Europe to a collapse of the Chinese economy are losing their sway as manufacturing around the world rebounds.

An Ugly Truth

Signs of growth in the U.S., meanwhile, debunk fears that high unemployment at home would lead to an inevitable deflationary cycle. But they also present an ugly truth: In an economy marked by sharp and growing household wealth disparity, it is possible to have both high unemployment and strong consumer spending. Aggregate personal consumption and GDP are again near all time highs -- but so is unemployment.

Nor should investors be entirely surprised. Citigoup (C) documented the vast purchasing power acquired by the upper echelons of American society in its now infamous "Plutonomy" report five years ago. The money and the wealth are still there, in the aggregate, but they're in fewer and fewer hands. This leads to the painful reality of economic growth that leaves millions behind.

Calls for government to get out of the way are currently on the rise amid soaring voter frustration at unemployment. Despite a positive turn in the short term, though, the American workforce is only going to face more stress as the forces of technology, globalization and wealth disparity grow. It's likely that regardless of the populist rhetoric, any solution to the employment problem will involve fundamental changes in both public policy and corporate practices.

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sheriffjim

Consider putting the Stock Market in government receivership. In 1989 the government put the Teamsters Union in Receivership. Because of that government intervention thousands of retired Teamsters are enjoying pensions in their golden years. Not one Teamster pensioneer has lost money.

November 08 2010 at 5:38 PM Report abuse rate up rate down Reply
fkuntuzangmo

Now you talk about this? more lies, by manipulators of Truth. Not one Republican plank from this election has be voted on, these candidates have not taken office yet, and they have done nothing but ship 8 million jobs out of this country, for the past 12 years, the blame for unemployment sits clearly on the shoulders of the corporate elite who run the Republican party, and no longer care about this country as long as cheap labor is available elsewhere as in china, OUTSOURCING, IS CAUSING THE DEATH OF THE AMERICAN DREAM – 8,000,000 jobs left this country during President G.W. Bush's administration, - Look at the average yearly salaries in these other countries, Especially, in China where the average yearly salary is pathetic, China – $1,290, a year, India – $14,500 a year, Japan – $17,000 to $50,000 (Depends on the region) a year, – $9,000 to $16,000 (Depends on the region) a year Outsourcing U.S. jobs is taking away from many families in the United States. Outsourcing jobs to foreign countries can be frustrating to consumers. Foreign accents can make it difficult for callers to understand what the foreign outsource worker is saying. This can drive customers away to other companies that use operators and sales staff who speak clear, accent-free English. these workers for he most part are based in the US. This is only part of the danger. At some banks, in this instance the cheap foreign outsourcing labor had been using Indian call centers to outsource some its workload. The workers in this call center used the information to gain access to American accounts to embezzle money from customer accounts. As it turns out, a worker in the United States holds a social security number that can be used for background checks. Outsourcing business to foreign companies eliminates the possibly for completing background checks. This makes it easy for the foreign workers to steal important account information, and to embezzle money from customer accounts. Unfortunately, companies are not going to stop outsourcing work until Americans stand up and fight. Write to your local politicians, your federal government, and make yourself heard. Start boycotting companies who do outsource their business to foreign countries. To fight outsourcing, it is going to be up to those at risk of losing their jobs. So let us stop the republican tea party rhetoric, and put the blame where it belongs, on big business.

November 08 2010 at 9:39 AM Report abuse +1 rate up rate down Reply
vobox3343

Republicans never want to acknowldge being duped. That's why you can't have any peace within. Look in the mirror, geez.

November 08 2010 at 8:04 AM Report abuse rate up rate down Reply
GAMessier

Outsourcing traces its origins to the decades after WW II. Then, the US was the only industrialized country with its manufacturing base intact. And in contrast with Europe, Russia, and Japan, our war losses were light. Thanks to pent up domestic AND OVERSEAS demand, our manufacturing flourished. Companies competed for workers, which empowered unions to press for still more and more benefits. Stated simply, WE HAVE PRICED OURSELVES OUT OF THE WORLD'S MARKETS. There is simply no way for manufacturers here in the US to deliver high pay and pension benefits, and health insurance, and have any hope of selling abroad. Other countries have fully recovered, and now have robust manufacturing capacity, modern distribution systems, and an eager and hungry workforce willing to work for a relative pittance. THAT's the problem: The big new markets are in Asia, but their wage scales make it ipossible for them to purchase US-made consumer goods. In order to apture that market, US companies have to produce overseas. Finally: we don't need any more houses (hits lumber mills, trades people, furniture and applicance manufacturers), our malls are full of merchandize, and our grocery stores are full of food. WHERE'S THE WORK THAT ISN'T GETTING DONE...?

November 07 2010 at 5:44 PM Report abuse +2 rate up rate down Reply
1 reply to GAMessier's comment
jstrongcmt

Cheap good from other third world and emerging countries have flooded our markets. Great if you're buying, deadly if you're selling. I used to make money selling refurbished furniture and other durable goods at yard sales. Now, nobody needs anything. There is no market for things here anymore. Even burglary is way down. Not because people are giving up on stealing from others, but because there is no market for anything except jewlery and cash... not so much for the jewelry. Why rob a house if you can't sell what you've stolen? Furniture, TV's other electronic goods... just pick it up at the curb on garbage day... more available than there is a need for.. most going into the garbage. The prosperous, productive post WWII economy that made our business hum is long gone and it wont be back any time soon. Maybe we can't compete with $.50 per hour Chinese labor, but how much of the crap we buy fromthem is really necessary? Get ready for austerity! If you aren't rich now you never will be. The cream will be going to the top 2%. Their advice? If there is no bread, eat cake!

November 08 2010 at 12:46 PM Report abuse rate up rate down Reply
LEON

Someone please explain to me how to create more jobs by outsourcing more to China and other countries. I only have a High School education and was a factory worker so maybe that's why I don't get it.

November 07 2010 at 10:21 AM Report abuse +4 rate up rate down Reply
Vic

Ignorant voters let themselves and the American people down...PERIOD! How can a voter listen to a voice either Rush Limbaugh or Mitch O'Connell(Rep)brag about not only (Hoping)Obama fail but actually blocking anything Obama tries to do by saying "No" to everything. Then, the ignorant voter go out and reinforce the "NO" to everything Obama wants to do to help the economy. Thats like a lineman on a football team hoping the quarterback never complete a pass....DUH!!

November 07 2010 at 5:32 AM Report abuse rate up rate down Reply
2 replies to Vic's comment
N68Firebird

Maybe the majority of the country felt Obama's "pass" was in the WRONG direction...

November 07 2010 at 8:12 PM Report abuse +1 rate up rate down Reply
jstrongcmt

I agree! We just gave the reigns back to the people that screwed up our entire economy... and they aren't even planning any changes in their direction. We get what we deserve.

November 08 2010 at 12:52 PM Report abuse rate up rate down Reply
littlebig1ct

Sadly, the people that are most hurt from this recession, are construction workers, home builders, and proffesions related to the housing market. unfortunately the people who started it, are unscathed by it.

November 06 2010 at 10:57 PM Report abuse +8 rate up rate down Reply
Larry

Lets not forget about NAFTA , the great big cure all and answer to our global trade superiority. ANY POLITICIANS OUT THERE CARE TO COMMENT ABOUT THIS ?

November 06 2010 at 9:39 PM Report abuse +3 rate up rate down Reply
bradbarb69

smnjack-we dont have 10-12 years to wait.If,as you say, the repubs caused the mess and O was elected to change that,then stop blaming them and show us some results!!!! You cant whine forever(although it still continues).Continual blaming of "inherited" problems after two YEARS is childish at best and destructive at worst.Tell me how sweetheart deals for unions will bring manufacturing jobs back.Tell me how taxation of job providers will incentivize them to add positions in their business.Tell me how ramming trough healthcare was the answer to all our dreams.You can blame Bush if you want,just remember the dems controlled the lawmaking body for much longer than 2 years.Put the blame where its due.

November 06 2010 at 8:29 PM Report abuse -1 rate up rate down Reply
3 replies to bradbarb69's comment
smnjack

If you voted Republican in the last election. You made a big mistake. They caused this mess and they are not going to clean it up. The only way out is bring back our manufacturing jobs and the Reppublicans are not going to do that. Right now the public sector and professional jobs are holding many of us up. This won't go on for long, 10 to 12 years, then they will be in the same circumstance as the rest of us. Of course, that is when things will start turning around, because the elected officials will be afraid of the masses.

November 06 2010 at 6:33 PM Report abuse rate up rate down Reply