The Bureau of Labor and Statistics released their November employment report showing the nation’s unemployment rate dropped all the way to 10%. While it is encouraging to see that the economy is beginning to recover, there are still some worrying data in the report. Heritage fellows James Sherk and Rea Hederman explain:

The unemployment rate fell from 10.2 to 10 percent in part because 98,000 workers left the labor force. Most of these workers were teenagers: 62,000 teens left the labor force. About 70,000 men age 20 and over left the labor force, but 35,000 women of the same age entered the labor force. These numbers reflect the difficulty that labor force entrants have had in finding new jobs. Since teenagers are far more likely to be unemployed, this helped reduce the unemployment rate. It is likely that the unemployment rate will climb once potential workers reenter the labor force.

The sourest note in the jobs report was the 293,000 increase in the number of workers unemployed for more than six months. The average duration of unemployment also rose from 26.9 to 28.5 weeks. Unemployed workers continue to have great difficulty in finding new jobs.

Hederman and Sherk go on to explain why the unemployment rate has remained so stubbornly high:

Despite this relatively good news, the nature of job losses in this recession suggests that the labor market recovery will be slow. Media coverage of net job losses in the recession gives the impression that unemployment has risen primarily because layoffs have increased. That is partly true: Layoffs have increased over the past year and a half, and they are painful for the workers involved. But the main reason unemployment has risen is because job creation has fallen.

Since the recession started, quarterly job losses have increased by 15 percent (1.1 million jobs) while job creation has fallen by 25 percent (1.9 million jobs). The number of workers laid off at companies going out of business rose by 7 percent (91,000 jobs) and the number of workers hired at newly formed businesses fell by 22 percent (313,000 jobs). Like the proverbial “dog that did not bark,” unemployment has risen primarily because of the private-sector jobs that are not being created. Research into past economic downturns suggests that lower job creation will continue to account for most of the net job losses throughout this recession.[3]

Why has private-sector job creation fallen so sharply? Businesses are retrenching wherever they can, taking measures to survive the immediate downturn such as laying off workers and conserving cash. The policy agenda in Washington–the health care legislation, cap-and-trade legislation, higher taxes to pay for more spending–has also contributed to businesses’ unease about the future. Entrepreneurs are reluctant to invest when they fear that federal legislation could make their business projects unviable.