Jobs Report: Life During Downtime

Today’s jobs report for December reminds (as if we needed reminding) that the economic “recovery” will be slow, sluggish and prone to setback from time to time.

Nonfarm payrolls were lighter by 85,000 last month, according to this morning’s monthly employment update from the Department of Labor. That’s a blow for quite a number of economic projections, some of which predicted a small gain., for instance, reported that a poll of economists had predicted a rise of 15000 in the December nonfarm payrolls number.

There is some good news in today’s report: the slight retreat in November jobs that was originally reported (-11,000) was revised upward to a feeble gain of 4,000. Of course, in a labor force of 130 million, such changes are insignificant. Indeed, nothing short of potent growth in the labor market over an extended multi-year period is required to repair the damage from the Great Recession. Even a sustained rise of 300,000 new jobs a month would take more than 2 years simply to return the labor force to its pre-recession high. Unfortunately, almost no one is predicting such a rosy scenario and there’s nothing in today’s numbers to suggest such a positive turn of events any time soon.

That’s no surprise at this late date. Our view on these pages since last summer has been that the recession was probably over but that it would bring an unusually weak recovery, particuarly on the labor front.

We’ve been writing for some time now that the technical end of the recession seemed set to arrive sometime in mid- to late-2009. Last June, we advised that the recession appeared on track to fade midway or so in 2009. The forecast was partly driven by the decline persistent decline in initial jobless claims, which we discussed extensively last year (including here and here), along with the extraordinary monetary stimulus and other factors.

But we’ve also recognized the post-recession cycle rebound for the foreseeable future looks unusually weak. As we noted in October, “the practical implications in a revival of GDP this time threaten to be quite unsatisfying for the immediate future.”

Certainly today’s employment report offers no reason to change our view. Although the job loss for December overall was mild by the standards of the past year or so, the fact that virtually every corner of the labor market retreated is a sign that the economy is still on the defensive. Indeed, even the normally buoyant services industry shed jobs last month, albeit mildly so.

Despite the gloom, net growth in jobs on a national basis is near. One clue comes by way of the recent upturn in the average workweek in terms of hours. In November, the average number of hours logged by workers turned up for the first time since July and to the highest level (33.2 hours a week) since March (see chart below). A rise in this measure tends to precede a return to net growth in the labor market after a recession. The question, of course, is whether the latest rise in this metric has legs. Today’s jobs report shows that the average workweek remained unchanged in December relative to November. At least it didn’t decline.

Barring some new event that surprises on the downside, the first half of 2010 is likely to witness a recovery in jobs. In fact, we’d be surprised if the first quarter of this year doesn’t show a net gain of several hundred thousand in nonfarm payrolls. But even this optimistic scenario pales by the standards of post-recession recoveries for the past half century. This, then, is the great challenge that awaits in the aftermath of the Great Recession. Alas, there are no easy solutions. Nor is it obvious that the crowd has yet come to terms with the potential for the political and economic blowback that the new normal seems destined to bring.

About James Picerno 894 Articles

James Picerno is a financial journalist who has been writing about finance and investment theory for more than twenty years. He writes for trade magazines read by financial professionals and financial advisers.

Over the years, he’s written for the Wall Street Journal, Barron’s, Bloomberg, Dow Jones, Reuters.

Visit: The Capital Spectator

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