Private-sector payrolls increased in December—the 12th consecutive monthly gain, the Labor Department reports. The trend is certainly favorable, although the details are disappointing. That’s partly because the net rise in job creation in corporate America was well below the increase implied by ADP’s estimate for December. Foiled again.
On the other hand, the crowd can point to a relatively large fall in the jobless rate last month to help ease the frustration with the lack of stronger job growth. The unemployment rate dropped to 9.4% in December from the previous month’s 9.8%. December’s jobless rate is the lowest since May 2009. It’s also the biggest monthly decline in unemployment since the recession officially ended in June 2009. Some analysts think there’s a disconnect between the decline in unemployment and the tepid net gain in payrolls, but that’s par for the course these days too. There’s always reason to remain skeptical with the macro number du jour, and today’s no exception.
Any way you slice it, the drop in the jobless rate is bittersweet. The ADP report from earlier this week, after all, juiced up expectations that the labor market had finally turned the corner and so substantially stronger job growth was at hand. That may still be true, but the revised thinking will have to wait at least another month.
For now, the pace of job creation reflects more of the same: modest growth. That’s better than losses, but one might wonder how long the market will accept such tepid numbers before throwing a hissy fit.
What will change the middling trend in employment growth? Good question. For the moment, no one has a good answer.
“The economy is adding workers but there are no reliable signs the pace of hiring is improving,” Julia Coronado, chief economist for North America at BNP Paribas, tells Bloomberg. “We are staying on track but I’m not sure growth is set to accelerate.”
Nor does a closer look at December’s modest employment increase necessarily stir thoughts that salvation is around the next statistical bend. For starters, the cyclically sensitive goods-producing corner of the economy continues to slump, posting a slightly net loss in payrolls last month, which follows November’s setback. Government employment continues to shrink as well.
Let’s turn to the bright spots, which includes one corner of the goods-producing sector: manufacturing, which netted 10,000 new positions last month. Of course, the big gains remain firmly in the services sector, which employs the lion’s share of the nation’s workforce. Last month witnessed a net rise of 115,000 payrolls in services, up from November’s 84,000 gain. So far, so good. But nearly 40% of the increase in services jobs was in the education and health industries. A comparable rise was posted in leisure and hospitality. Nothing wrong with that, and the gains are surely welcome in a time of high unemployment. But gains in these areas aren’t exactly the type of economic growth that motivates expectations that the U.S. is poised to return to the heady days of robust labor market increases in the pre-2008 era. Then again, maybe the next boom will be centered in hospitals and hotels. Stranger things have happened.
But let’s not overdo the pessimism. The economy is minting new jobs and the recession is clearly over, at least from a macro perspective. That’s not going to satisfy Main Street necessarily, but for the moment that’s all we’ve got. Yes, the era of diminished expectations is still here, and today’s job report isn’t making it easy to revise the diagnosis.
“The trend towards employment growth is intact,” says Peter Kenny, managing director at Knight Capital Group, via Fox Business. “It’s disappointing but it’s still a gain.”