After years of frustration and outright skepticism, investors and job seekers alike are finally acknowledging that the most closely watched piece of economic data in the world—the monthly payroll survey from the U.S. Department of Labor—is pointed in the right direction.
December’s statistics revealed that U.S. employers created a net 200,000 jobs, enough to keep up with population growth and even put a few of the long-term unemployed back to work. The number was especially welcome, coming as it did mere months after the summer’s federal budget debate effectively froze government hiring.
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As independent economist Fritz Meyer notes, the government has gone from being a major creator of jobs to becoming a drag on the overall labor market. He thinks that’s actually a good thing as the private sector picks up the slack. “I think in many cases, government budgets need to be squeezed,” he explains. “Nonetheless, we’re seeing continued year-over-year government job losses. Until that turns around, the headline number [for overall monthly job gains] probably won’t go back to 400,000 or 500,000 as it has during previous recoveries.”
 Meyer points to the survey of private-sector employment released each month by payroll processing company ADP as the really good news. According to ADP, a net 325,000 Americans found jobs in December—many more than the Labor Department statistics, which include government hiring and firing, would indicate.
For many economists, the question now is whether U.S. businesses will keep creating jobs as overseas economic conditions stagnate and the government pulls back further. Meyer is still watching weekly unemployment claims numbers, down substantially in recent months. And the fact that planned layoffs dipped to a six-month low in December is also a positive sign for those worried that the summer’s financial market gyrations would drive employers to put expansion plans on hold.
While the number of layoffs in December came in 31% above 2010 levels, that reflected a record number of government job cuts. Taking the public sector out of the equation, 20% fewer Americans lost jobs than were laid off the previous year.
Granted, the job market still has a long way to go to recover all the ground lost between early 2008 and early 2010, when a net 8.7 million jobs were destroyed. But as corporate employers take the baton from the government and put people back to work, economists feel confident the recent surge in hiring will eventually translate into improved consumer sentiment and, ultimately, more robust household balance sheets.
If anything, the extent of the damage may only make the eventual recovery more sweet. As Fritz Meyer says, net new job formation now actually looks a lot stronger than we saw during the first two years following the previous recession. |