Good News For The New Year? December Jobs Report Offers (Some) Hope

Some good news in the December jobs report.

For the past three years, people have been waiting for the moment when the job growth engine in the United States would start turning around. Every now and then we’ve gotten tantalizing hints that it might happen, only to be disappointed a few months later when the numbers would again fall flat and the odds of the country digging out of its deepest unemployment hole in a generation any time soon grew slimmer and slimmer. As I noted yesterday, there was a hint in the ADP hiring rfinalleport that December was a good month for jobs growth, but we’ve learned over the past year or so that ADP doesn’t always measure the numbers in a manner that match up well with the Bureau of Labor Statistics methodology. This month was no exception, but the December jobs report released this morning was nonetheless pretty good and offers some hope that perhaps we’ve finally turned a corner:

The U.S. unemployment rate unexpectedly fell to 8.5 percent last month as job creation was more robust than expected, providing continued signs that the nation’s labor market is improving gradually.

Growth in manufacturing jobs helped offset loss in government positions, while wages edged higher and the length of the work week also lengthened a bit.

The unemployment rate — a hotly contested number because of the rise in potential workers who have quit looking for jobs — has fallen 0.6 percentage points since August.

However, an alternative measure of unemployment that counts discouraged workers also dropped sharply. The so-called U-6 number, more encompassing than the headline number the government publicizes, dropped to 15.2 percent from 15.6 percent in November.

Economists had been looking for a number in the 175,000 range as both Wall Street and Main Street search for signs that the labor market is thawing. November saw a gain of 120,000 jobs and an unexpected fall in the unemployment rate from 9.0 percent to 8.6 percent.

There are some caveats, of course. The civilian labor force, which includes everyone working and everyone actively looking for work, declined by another 50,000 people in December. Not as bad as the 100,000+ drop in November, but also a sign that some people have just given up looking and have decided to sit on the sidelines for now. Of course, as was mentioned on CNBC this morning, there’s also evidence that at least some portion of these people leaving the workforce early are people who have decided to take early retirement if they can afford it. Those people aren’t likely to be coming back into the workforce. However, it’s worth noting that if we had the same labor force participation rate now that we did at the start of the recession, the unemployment rate right now would be north of 11%. At some point, a good portion of those people sitting on the sidelines are going to start looking for work again, and that’s likely to give us at least a temporary increase in the Unemployment rate.

As the Wall Street Journal notes, though, the drop in the unemployment rate in December was largely due to job growth, not workers giving up:

The U.S. unemployment rate dropped to 8.5% in December, while a broader measure dropped even further to 15.2% from 15.6% the prior month, both at their lowest levels since February 2009.

While the unemployment rate has been falling in part due to people leaving the labor force, a large portion of this month’s number appears to come from people finding jobs.

The unemployment rate is calculated based on people who are without jobs, who are available to work and who have actively sought work in the prior four weeks. The “actively looking for work” definition is fairly broad, including people who contacted an employer, employment agency, job center or friends; sent out resumes or filled out applications; or answered or placed ads, among other things. The rate is calculated by dividing that number by the total number of people in the labor force.

In December, the household survey showed the number of people employed rose by 176,000, as the population increased by 143,000 over the month. So even though the labor force — the number of people working or looking for work — fell by 50,000, job growth is outpacing the increase in the population.

(…)

The key to the drop in the broader unemployment rate was due to a 371,000 drop in the number of people employed part time but who would prefer full-time work, that comes on top of big drops in that category over the past two months. That number could reflect people having their hours increased or part-time workers moving on to full time work.

More from the CNBC report linked above:

Job gains came from a variety of quarters: Transportation and warehousing surged by 50,000, the couriers and message industry rose 42,000, and retail added 28,000. Manufacturing grew by 23,000 and the hospitality industry continued its brisk pace, adding 24,000 jobs in December and 230,000 over the past year at food and drinking establishments.

“To be sure, manufacturing gains remain lackluster and gains in construction still await some awakening in the housing market,” said Kathy Bostjancic, director of macroeconomic analysis at The Conference Board. “But there has been enough retail activity to allow the service-sector to show moderate and sustained job gains.”

One thing we did not see this month that we’ve seen in previous months was a drop in government workers, which could be an indication that state and local governments have finished with their austerity measures, at least for now. It could pop up again the next time they have to go through the budgeting process (conveniently right before the elections) but an improving economy could also mean increased tax revenues, lessening the need for cuts in employment.

So, it’s some pretty good news this month, finally. Adding up the entire year together, there were roughly 1.9 million net new jobs created in 2011. Nothing to sneeze at, but also far from the kind of recovery we need to get people back to work who have been looking for a year or more. Nonetheless, December was the sixth consecutive month that we’ve seen 100,000 or more net jobs created, something we have not seen in six years. It’s nice to see some good news for once.

Politically, this obviously is going to make the Obama White House, and the re-election team in Chicago, smile just a little bit. Today’s numbers are first of ten employment reports we will see before the November 8th election (the October report will come out the Friday after the election). A consistent stretch of good news will quite obviously inuure to the President’s benefit, through Republicans will try to spin it another way. This is why it’s far too early for anyone to count the President out of this. The economy will decide his fate to a large degree, but if the economy is improving over the next ten months then that helps the President make the case against “changing horses in mid-stream.” But that’s all something that will work itself out over the next year. We could be back to disappointing reports another month or two from now, in which case the political picture becomes murkier.

We’ve still got a long way to go here, and it would be nice to see the net jobs closer to 250,000 or 275,000, but this is encouraging news.

FILED UNDER: Barack Obama, Campaign 2012, Politicians, US Politics
Doug Mataconis
About Doug Mataconis
Doug Mataconis held a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010 and contributed a staggering 16,483 posts before his retirement in January 2020. He passed for too young in July 2021.

Comments

  1. Hey Norm says:

    Actually we dropped 12,000 Public Sector jobs…just to keep the Libertarians happy.
    As I mentioned yesterday…hopefully we will begin to see a positive feedback loop where job growth creates increased demand which creates more jobs which creates more demand…etc.

    Pretty good week for Obama.
    First he wins the Iowa caucus.
    Then he bitch-slaps the GOP with recess appointments.
    Now this.
    Aren’t the Republicans in a primary race, or something?

  2. Hey Norm says:

    Actually…we are probably already seeing that positive feedback loop…hopefully it will continue to accelerate.

  3. A good breakdown at Modeled Behavior. Apparently 9K of the government 12K were still in education.

  4. Jeez, just saw the update of this graph from Calculated Risk.

    That’s the image to lead with. Worst jobs recovery evar.

  5. Rob in CT says:

    @john personna:

    I hate that chart. How can you not? Note also the similarity (in form, not severity) between this recovery and the post-2001 recession recovery. Perhaps I should scarequote recovery.

  6. Rob in CT says:

    Come to think of it, the early 90s recovery has the same shape. We haven’t had a “v-shaped” recovery in a long time, have we?

  7. Hey Norm says:

    @ John/Rob…
    Also the worst recession ever. Certainly a stimulus geared to the actual level of contraction would have helped. But imagine if the auto industry had been allowed to fail. Or if we had not bailed out the banks.
    Let’s just hope Europe doesn’t collapse on us.

  8. mantis says:

    Adding up the entire year together, there were roughly 1.9 million net new jobs created in 2011.

    And the economy lost 280,000 public sector jobs in 2011. That’s because we have a “BIG GOVERNMENT LIBRUL” in the White House who has engaged in “UNPRECEDENTED GROWTH OF GOVERNMENT.” Right? I mean, that’s what I keep hearing from the right, so it must be true.

  9. We “lost government jobs” because states could no longer afford the employees they let go. Simple business decision, actually

  10. We “lost government jobs” because states and localities could no longer afford the people they let go. That’s how these things work, you know

  11. @ Rob/HeyNorm, the thing that’s striking about the chart is the progression, the lengthening and flattening of jobs recoveries from 1981, to 1990, to 2001, and finally to 2007. This obviously deeper than “who is President?”

  12. @Doug Mataconis:

    We “lost government jobs” because states could no longer afford the employees they let go. Simple business decision, actually

    If you can find a government operating on a profit model, maybe your “business analysis” will make sense.

    Otherwise, it is a completely different game. Governments decide spending, and decide revenues, based on services demanded by voters.

  13. mantis says:

    @Doug Mataconis:

    We “lost government jobs” because states could no longer afford the employees they let go. Simple business decision, actually

    What is the point of this comment? To tell us that jobs are cut to meet budgets? Thanks for the insight.

    The point is that the economy would be doing even better, and our unemployment rate would be even lower, if those people were still working. There are ways those jobs could have been saved, but weren’t, and the loss of those jobs has an impact on the economy in both the short and long terms. I can understand why you would want to ignore that, instead issuing pointlessly obvious assertions that ignore the issue. If you think that government jobs are an inherent evil, then of course you will pretend that those jobs don’t play a part in the health of the economy and employment in this country. But it just ain’t true.

    And I’m not saying that all government jobs are good and should never go away. I’m not saying there is no room to trim and cut in government employment. However, the time to do that is not in the midst of an awful recession. It may seem like the thing to do, and local governments may not have a choice in the matter, but it’s still very counterproductive if you want the economy to improve.

  14. Moosebreath says:

    Doug,

    “We “lost government jobs” because states and localities could no longer afford the people they let go make cutting taxes their highest prioity. That’s how these things work when you elect Republicans, you know ”

    Fixed that for you.

  15. Hey Norm says:

    @ John/Rob…
    And that change in the shape of recoveries started showing with the advent of supply-side economics, the flattening of middle-class incomes, and skyrocketing inequality…coincidence?

  16. @Hey Norm:

    I’m more a globalization/shipping-container kind of guy.

  17. Hey Norm says:

    States and localities couldn’t afford to keep workers on because the Federal Government slashed aid…sort of a trickle down effect if you will. The idea that states have to have balanced budgets is nonsense…because they rely on the federal government. Only Republicans have refused to aid the states. Thus they layoff people which creates less demand which requires further layoffs which creates less demand etc. etc. etc.

  18. @Hey Norm:

    It’s just a fact that some state governments, like ours in California, were too aggressive in expanding services in boom (esp. dot-com) years.

    So, they’d have to unroll some spending when they discovered (shocking, I know) that the dot-com years and million-dollar incomes for mid-level programmers, could not go on forever.

  19. Hey Norm says:

    @ John…
    I know!!! And I do not discount that those containers had a role.
    FYI…you should love this…
    http://www.runkleconsulting.com/category/projects/shipping-container-building-projects/
    This sort of thing is going on all over the country. One of my professors at UCLA was a pioneer of this back in the late 90’s. So it’s nothing new…but still pretty cool.

  20. @Hey Norm:

    The Atlanta house looks pretty neat.

  21. One thing I have to wonder is how many of these new jobs are permanent jobs, and how many were just seasonl employment for the holidays. Hopefully the former, but until we see the January report, we won’t know.

  22. mantis says:

    Here’s a bunch more jobs we could have lost, but didn’t, thanks to government intervention:

    All three U.S. automakers are on track to be profitable in 2011 when they report results in the coming weeks. That’s something that hasn’t happened since 2004.

    And there’s hope for the future because even better profits may lay ahead.

    Analysts are in widespread agreement in forecasting better industrywide sales in 2012 and beyond. They see sales rising from 12.8 million in 2011 to between 13.5 million to 14 million this year and close to 15 million by 2014 or 2015.

    “In terms of profitability and outlook, this is the best conditions we’ve had for the U.S. auto industry in a long, long time,” said Jesse Toprak of TrueCar.

    Only federal bailouts and bankruptcies in 2009 kept GM and Chrysler alive, while Ford lived on cash it had borrowed just before the crisis.

    “They have very few bad products out there any more,” said Jeremy Anwyl is vice chairman of Edmunds.com.

    That’s one of the reasons the Detroit automakers all reported market share gains in 2011, the first time they were all able to do so since 1988.

    I’m sure the right will tell us how the fascist takeover of industry by Il Duce Obama was evil and wrong, and the American auto industry deserved to die a swift death. What would our unemployment rate be if that happened, with all the jobs that the auto industry supports lost?

    Let’s look at white some Republican shining lights said at the time, (h/t ThinkProgress):

    Sen. Jim DeMint (R-SC): “Now the government has forced taxpayers to buy these failing companies without any plausible plan for profitability. Does anyone think the same government that plans to double the national debt in five years will turn GM around in the same time?” [6/2/09]

    Rep. Lamar Smith (R-TX): The auto company rescues “have been the leading edge of the Obama administration’s war on capitalism.” [7/22/09]

    Rep. John Boehner (R-OH): “Does anyone really believe that politicians and bureaucrats in Washington can successfully steer a multi-national corporation to economic viability?” [6/1/09]

    Sen. Richard Shelby (R-AL): “It’s basically going to be a government-owned, government-run company. …It’s the road toward socialism.” [5/29/09]

    And one that should be repeated in Michigan every day between now and November:

    Let Detroit Go Bankrupt
    By MITT ROMNEY
    November 18, 2008

    IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye….

    Kiss Michigan goodbye, Mitt. They aren’t going to care that you were born there.

  23. ponce says:

    What pathetic issue will the hapless Republican candidate try to cling to when the economy is booming at election time?

    My guess is they’ll don the robe and hood and go full George Wallace.

  24. Hey Norm says:

    Santorum sez that UE dropped because of

    “…optimism that Republicans will take the White House…”

    It’s not clear from the report whether he was joking or not.

  25. Some interesting digging here on the spike in “courier” jobs:

    About those 42,200 New Courier Jobs

  26. Hey Norm says:

    The reality of this is that things are going in the right direction…and consistently. But if you were driving your car up this hill you would want to step on the gas. The reason we aren’t is because the Republicans don’t want to. A slow recovery, or no recovery, suits their purposes just fine.
    One thing that would have bi-partisan support in a sane world is investing in infrastructure.
    Another thing Obama could do…without Congress…is to institute a mass refinancing of Fannie and Freddie mortgages…which would be the equivilant of a long-lasting tax cut.
    There are proven ways to goose recoveries. The only thing necessary is for the Republican party to actually want to create jobs.

  27. Liberty60 says:

    @Doug Mataconis:

    We “lost government jobs” because states could no longer afford the employees they let go. Simple business decision, actually

    Our company, a midsize architecture firm, decided that we should run our business like a Republican runs government.

    We recognize that there is a need for what we offer, but we also believe that people can do much of it for themselves, and even for what they can’t do, they should pay less. Paying us for what we provide is (as so many brilliant economists pointed out), a form of theft when we coerce them into giving us money in exchange for an invoice.

    To that end, we unilaterally slashed our fees by 25%.

    The next quarter, we reduced the scope of what we offered, on the grounds that our customers could do more for themselves.

    The following quarter, as our customers paid less, and some did our job for themselves, we discovered we had less revenue.

    Therefore we laid off 25% of our employees. Because, of course, we could no longer afford them.

    Simple business decision, really.

    Our strategy is to slash our fees yet again, along with offering less service, in hopes that we can shrink the company yet again.

    Our business plan is to be out of business within 5 years, and encourage people to do their own building design and engineering.

    But only with concerted effort and shrewd leadership.

  28. Rob in CT says:

    @john personna:

    Yes, clearly. Like you, I think there is more going on here than just US government policy changes (though I certainly think that is an important factor).

    I’d love to see that chart with the Great Depression (and, if possible, earlier recessions/depressions) included, since I think the ’08 crash was the worst since then… I think the GP is actually an important reference point. For most recessions, it is not. For this one I think it is.

  29. anjin-san says:

    I wonder how the GOP will deal with this terrible news…

  30. Oberon Stump says:

    I hope this year will be good

    Europe and America need more jobs