January 6, 2012

U.S. Adds 200,000 Jobs—but What Type?

Job creation in December beat forecast of 155,000

(Photo: AP) (Photo: AP)

The Department of Labor released figures on Friday that indicated the jobs situation was better than expected in December, with 200,000 jobs added and the unemployment rate continuing to trend down. It's now at 8.5%, compared to 8.7% in November. The consensus estimate was for 155,000 new jobs to be created last month.

The Bureau of Labor Statistics said in its report that job gains occurred in transportation and warehousing, retail trade, manufacturing, health care and mining. Some economists, though, were not impressed with the quality of the jobs added. Steve Blitz, chief economist at ITG Investment Research, said in a statement, “The good news is that employment is up. The bad news is that the higher paying jobs have yet to return.”

Blitz pointed out that average hourly earnings were unchanged, and that 20% of the increase in private payrolls was for messengers and couriers. Net hires at restaurants and retailers, added Blitz, combined with the aforementioned messenger jobs, made up 44% of jobs added in December, with “no real increase in jobs in information, financial activities or professional and business services.”

Hiring of temps fell by 7,500, which Ian Shepherdson, chief U.S. economist at High Frequency Economics, cited as troubling. In a statement, he said, “[T]hat needs to be watched, as temp hiring can be a leading indicator of future permanent hiring.”

But Shepherdson was more upbeat about the increase in employment, quality notwithstanding. With the rate of loss of government jobs slowing and hiring beginning “[o]nce it became clear spending was not following confidence down,… supported by better bank credit conditions,” he said in an analyst's note. “We see these trends as sustainable: This is the real deal for the U.S. economy, at last. Wage gains are still very modest, up just 0.2% in December, but the key point is that job growth is accelerating, and there is more to come.”

A gain in employment, particularly one that was so much larger than expected, was welcome news to Democrats. Senate Majority Leader Harry Reid, D-Nev., said in a statement, “Creating jobs must continue to be Congress' top priority. While the economy has shown signs of improvement, that is no consolation for the millions of Americans who are out of a job and struggling to make ends meet … I hope my Republican colleagues have learned from their recent mistakes, and will begin the New Year focused on working with Democrats to create jobs, instead of scoring political points against President Obama.”

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