The new jobs report released by the Labor Department today shows the economy is on the mend, creating 200,000 jobs in December and dipping the unemployment rate down to 8.5% from November’s revised 8.7%. This is positive news for Americans and reason for the unemployed to keep hopes up and keep looking for opportunities.
Over the last six months, the economy has added over 100,000 jobs a month, a far cry from the number actually needed to significantly reduce unemployment. Most economists say the economy needs about 300,000-400,000 jobs added per month in order to significantly reduce the unemployment rate and get the economy back to pre-Recession levels by the end of the year, but as Moody’s Analytics Chief Economist, Mark Zandi says of today’s Labor Department report, “I think it’s a very positive report, unambiguously.” As CNN reported, the 200,000 jobs added in December boosted 2010's total to 1.6 million jobs added for the year. Most economists agree that number would have been higher if not for numerous factors dragging down the economy in the 2nd quarter last year and the recent turbulence in Europe.
Last spring the devastating earthquake and subsequent tsunami in Japan, the world’s 3rd largest economy, reverberated through the global markets. In the summer, the Debt-Ceiling standoff here in the United States created much uncertainty and stalled positive growth up to that point for 2010 as recalcitrant Republicans threatened to allow the country to default on its debts for the first time in our nation’s history. And then most recently, the Euro-Zone crisis once again put investors and the markets on shaky ground. Accordingto John Canally, economic strategist at LPL Financial, “The Europe situation created uncertainty, and uncertainty was used as a reason not to hire until now.”
Even that, however, belies a troubling fact. Consumer confidence was up in November and December and people were spending for the holidays in record numbers. Black Friday sales soared and as a result, retail saw heavy gains in employment as well as restaurants and food services. The biggest gains were in transportation, especially courier services hiring for the holidays. With the holidays now over and people reassessing their bank accounts, January could see a flurry of layoffs again and a rise in unemployment. Plus, jobs in retail and the food services industry are generally low or minimum wage jobs. If the unemployed are taking drastic pay cuts just to find temporary work, that may not necessarily improve their living standard or take them off the job market. Not all the data suggests this is the case, though. Some believe there are signs of real economic life budding here.
"It's one of those things where you look at that and say, 'That would be really cool if that continues,' " says Diane Swonk, an economist with Mesirow Financial, speaking of a recent ADP report, a payroll processing company. The report showed an estimated 325,000 jobs gained in the private-sector in December. In a statement to The New York Times, Ms. Swonk said most of the new jobs in the ADP report were with small businesses since, generally, only small companies use payroll companies, and small business is the job growth engine. If it's revving, there's good reason to believe that hog will be hitting the road in no time.
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