Despite growing signs that the economy is recovering, recent unemployment data have exposed a sore that is taking a while to heal.
Jobless benefits allow the unemployed to spend enough to add about 0.6 percent to the GDP, a government study says.
But analysts are increasingly anxious for real healing to begin.
"We need to declare a war on unemployment," said Brian Belski, chief investment strategist for Oppenheimer & Co. Inc., who compares the need for urgency to the Reagan administration's war on drugs. "We need to go to corporations and say, 'Why are you building in China and Vietnam? We will remove taxes for two or three years if you will build in Minnesota or some other state.' "
Belski is among analysts worried that U.S. jobs will go abroad and skeptical that businesses, on their own, will do the hiring the U.S. economy needs.
"What's their incentive?" Belski said. "They are sitting on the best balance sheets since the 1950s and plenty of free cash flow. Productivity is clipping away, and they are reporting record profits."
Economists had assumed that businesses would start hiring as they regained their strength. Instead, they are hoarding cash: Profits for Standard & Poor's 500 companies are expected to increase 47 percent for the year.
Waiting too long
They are behaving as expected, delivering profits to shareholders, Belski said.
But there are risks in waiting too long for companies to be motivated to hire.
"The longer unemployment lasts, the more structural (or entrenched) it becomes," said Nariman Behravesh, chief economist for IHS Global Insight Inc. "The longer people are out of jobs, they lose skills and marketability."
The unemployment rate ticked up to 9.8 percent in November, compared with 9.6 percent in the previous month, with 15 million Americans unemployed and 6.3 million unsuccessfully looking for work for at least six months.
"In good times, most find jobs in six weeks," said Betsey Stevenson, the U.S. Labor Department's chief economist. "There just aren't enough chairs," she said, using a musical-chairs analogy. "Those that can't find jobs aren't too slow or unskilled; they are just unlucky."
There are about 4.4 job seekers for every job available, Stevenson said.
The United States relies on consumers to support about 70 percent of the economy, so the latest unemployment report shook economists. They had assumed that 150,000 jobs would be created in November, rather than just the 39,000 that were tallied. Not only was unemployment up and job creation anemic, but wages remained flat and companies were not adding hours for employees.
The flat workweek "is another indication that companies were not that busy last month - certainly not straining themselves to meet demand," said Gluskin Sheff & Associates Inc. economist David Rosenberg. "This was arguably one of the worst employment reports of the year."
The November jobs report was so poor that Behravesh wondered whether it was "a fluke." He expected about 100,000 jobs to be created and thinks the numbers will show up in future unemployment reports. As employment slowly builds, he expects unemployment to drop to 9 percent by the end of 2011.
Deutsche Bank AG economist Joseph LaVorgna also wondered whether the 9.8 percent unemployment rate was correct. That's because federal income-tax receipts point to a stronger job picture.
"Tax receipts rose nearly 7 percent in November relative to the comparable period last year," he said. "If sustained, this would be twice the average annual growth rate that prevailed during the last growth cycle," 2001 to 2007.
In January, economists expect to see this more encouraging job picture reflected in December unemployment figures - salve or not.