The Economist
Something is working
AS THE good news out of the American economy accumulated toward the end of 2011, an important question loomed: would it translate into more jobs? Signs were encouraging. Hiring picked up in the fall from the poor performance over the summer, and weekly claims for unemployment benefits have fallen to levels last seen in early 2008. In November, the unemployment rate ticked downward, from 8.9% to 8.7%, despite a mediocre rise in payrolls of just 100,000 jobs. Would better gains still be forthcoming?
It is too early to celebrate, but one can at least heave a sigh of relief after a December jobs report that shows a meaningful acceleration in employment growth. This morning, the Bureau of Labour Statistics released preliminary numbers on the American labour market in December, and the news is good. Non-farm employment rose by 200,000 jobs for the month. Private employers added 212,000 jobs, slightly offset by the continuing decline in government employment. In the 12 months through December, the American economy added 1.9m private-sector jobs—the best performance so far in this recovery. The unemployment rate dipped again, from 8.7% to 8.5%. Part of the decline was once again associated with departures from the labour force, but rising employment accounted for much of the improvement.
Payroll growth was fairly broad in nature. Construction employment rose by 17,000 in December, though very little of that was attributable to improving prospects for residential construction. Manufacturing employment rose by 23,000, all of it in durable-goods production. The American economy added 225,000 manufacturing jobs in 2011. Service-sector employment, especially in health-care industries, added substantially to growth, and there was a curious rise of 42,000 jobs for "couriers and messengers". Some of that may subsequently be revised away; it seems likely that the bureau's seasonal adjustment isn't large enough.
Government job losses knocked 12,000 off the non-farm employment total. That's unfortunate, but there is a silver lining to that aspect of the report. The year-on-year fall in government employment has declined steadily since May, when it peaked at nearly 900,000 jobs. As state and local government tax revenues recover, the pace of government job loss is declining. The end of mass government sackings will remove a significant drag on total employment growth. The construction industry provides a similar story. In 2010, construction job losses knocked 149,000 off of employment growth. Construction may not contribute strongly to new hiring, but the switch from big declines in payrolls to small increases will make the overall labour market picture much sunnier.
In the scheme of things, 200,000 in new job creation is a disappointing result. There are still 13m Americans unemployed, and millions more have fallen out of the labour force entirely. Employment remains some 6m jobs below the pre-recession peak, and it will take months of job creation greater than that observed in December to restore the labour market to health. But America's employment picture looks better now than it has in years and—for the moment—indicators point toward continued strengthening. Shocks, expected or unexpected, may trample on this rosy outlook, as occurred in 2010 and 2011. But there is also the prospect that firms and individuals across the economy, having waited so long for something that seems a durable recovery, will take these signs as the signal to begin investing and hiring in earnest at long last.
http://www.economist.com/blogs/freeexchange/2012/01/americas-economy
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