The long-awaited job surge is going to take a while longer to appear. Expectations, based on strong retail holiday spending and other indicators of growth, got ahead of reality. Growth is solid, but companies remain wary of hiring workers.
The economy added 103,000 jobs in December, fewer than the expected 150,000 gain. At the same time, November was revised to show an increase of 71,000 from an initial report of 39,000. If, a month from now, the December revision is comparable, the tally of jobs created will be around what had been expected.
Even with a sizable upward revision, the employment picture continues to be mediocre. The unemployment rate fell from 9.8% a month ago to 9.4%, the lowest level since May 2009. But that apparent good news isn’t so good. The decline is due mostly to workers giving up the search for employment and thus not being counted in the Labor Department’s telephone survey of households.
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As growth accelerates this year, we expect creation of about 2.5 million net new jobs as the unemployment rate declines slowly, ending the year just under 9%. That would be progress, but it would still leave many households in distress because 8.4 million jobs were lost as a result of the deep recession. There was enough growth during 2010 to foster creation of 1.1 million new jobs, but that’s just enough to handle population growth and newcomers entering the labor force.
The report’s numbers support the Federal Reserve’s easy credit policy stance. Officials at the central bank’s Dec. 14 rate-setting meeting repeated commitment to their plan to buy $600 billion in Treasury securities through June in order to stimulate more economic growth. GDP increased around 2.8% last year, but the Fed sees that as “disappointing.”
There is some indication of broadening improvement. Digging below the national picture to metropolitan areas, the real estate investment services firm Marcus & Millichap says employment will expand more than 2.5% this year in Washington, D.C., Dallas, Houston, Austin and Orange County, Calif. Laggards with job growth of 1.2% or less include Sacramento, Calif., Louisville, Ky., Detroit, Baltimore, Oklahoma City and Cleveland. But, says Hessam Nadji, the firm’s managing director for research, this will be the first year since before the recession in 2007 that “even lagging metro areas will add jobs.”
That’s no comfort to one category of workers that’s in free fall: State and local government, which lost 20,000 jobs in December. Financial stress has resulted in a loss of about 400,000 since the peak employment of 19.8 million in August 2008. A further decline will occur this year, with as many as 150,000 jobs lost.
The increases in December occurred in jobs at restaurants, bars, hotels and in health care. There was also a small increase in federal government workers and in retail employees. Construction, meanwhile, continued its struggles, losing 16,000 jobs.
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