WASHINGTON — Beneath the numbers in Friday's government report on employment in December, the dominant trend is clear — the economy is continuing to recover slowly, and to add jobs slowly, and analysts agree that 2011 looks more promising than 2010.
However, the numbers in December's report itself were somewhat confusing. The unemployment rate dropped sharply to 9.4 percent, down from 9.8 percent. But employers added only 103,000 jobs during the month — far fewer than expected.
Moreover, analysts think that as the recovery gains traction, the unemployment rate is likely to rise anew, as jobless workers who'd given up looking plunge anew into the job market and thus get counted as looking for work.
So while the long-term trend is clear — a slowly improving economy and job market — the month-to-month data is a little erratic.
Forecasters had expected that December might be when the economy turned the corner to strong hiring, with most projections showing 175,000 new jobs or more, so the 103,000 net job total was both surprising and disappointing, if still positive.
"The job numbers weren't as good as hoped for, but they weren't bad. The 103,000 gain in payroll jobs plus the upward revisions in the previous two months, puts the December level of employment close to expectations," said Mark Zandi, the chief economist for forecaster Moody's Analytics.
Technical measurement issues may be under-reporting the actual level of hiring, he said. Zandi estimates that the work force is probably really expanding by a bit more than 150,000 jobs a month. That's the threshold needed to cover new entrants into the labor force and begin reducing the jobless rate.
At the same time, Zandi questioned the four-tenths of a percentage point drop in the jobless rate.
"I wouldn't read anything into the unemployment rate decline given the ongoing decline in the labor force. I suspect there are seasonal issues as well. . . .My sense is that it is still near 10 percent."
In fact, both November's unemployment rate jump to 9.8 percent and December's drop to 9.4 percent seem off base, according to analysts at RDQ Economics.
"We will average the two and say that the unemployment rate stands at around 9.6 (percent), which was also the average for the year as a whole," RDQ wrote in a research note.
There were bright spots in the disappointing report.
Some 70,000 more jobs were created in October and November than were first reported. Temporary hiring, a harbinger of more full-time jobs, rose by 15,900 jobs in December. Health care added 35,700 jobs, and the leisure and hospitality sector gained 47,000.
But manufacturing added only 10,000 jobs, and construction shed another 16,000.
Testifying before the Senate Banking Committee, Federal Reserve Chairman Ben Bernanke said that the recovery continues, but not strongly enough yet to sharply reduce the jobless rate.
Still, he said, "we have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold."
Bernanke added that business investment is ticking up, but the housing downturn will continue to be a drag. "The pace of economic recovery seems likely to be moderately stronger in 2011 than it was in 2010," Bernanke said.
The head of the president's Council of Economic Advisers, Austan Goolsbee, noted on CNBC television that more than 1.3 million jobs were created in 2010, and said that the recovery gained steam month by month.
"That's a good start . . . we're on a roll," he said.
The new speaker of the House of Representatives, Rep. John Boehner, R-Ohio, was less sanguine.
"Any signs of job growth are encouraging, but a 9.4 percent unemployment rate and $14 trillion debt are by no means adequate to get our economy growing," Boehner said in a statement.
Speaking at a window manufacturing plant in Landover, Md., President Barack Obama said hiring continues to rebound.
"We know these numbers can bounce around month to month but the trend is clear," Obama said. He suggested that jobs will grow sharply as businesses take advantage of new temporary provisions in the tax deal he cut with Republicans last month that will allow businesses to write off investments when expanding and hiring.
Friday's report was surprising largely because Wednesday's ADP National Employment Report, which is compiled off of actual payroll data instead of surveys, showed 297,000 new private-sector jobs in December. That's far more than Friday's Bureau of Labor Statistics report, which recorded a gain of 113,000 private-sector jobs.
The ADP report wasn't the only positive jobs indicator. The four-week average for first-time jobless claims is now at the lowest levels since the U.S. financial system nearly melted down in September 2008. And surveys by the National Federation of Independent Business also suggest strong hiring by small firms.
The missing ingredient continues to be psychological.
"I'm optimistic about job growth this spring and summer, as all the preconditions for a better job market are coming into place," Zandi said. "Profits are strong and balance sheets are healthy. Credit is flowing a bit more freely. Confidence has been the missing ingredient, but I expect sentiment to steadily improve. The economy created 1.35 million private sector jobs in 2010; I expect double that in 2011."
DECEMBER BY THE NUMBERS
- Construction, down 16,000.
- Trade, transportation and utilities, up 31,000.
- Financial services, up 4,000.
- Leisure and hospitality, up 47,000.
- Manufacturing, up 10,000.
- Health care, up 35,700.
- Government, down 10,000.
- Retail, up 12,000.
- Professional and business services, up 7,000.
- Temporary help services, up 15,900.
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