January’s employment numbers marked another month of consistent but unremarkable gains, pointing to a more-of-the-same economy for the foreseeable future.
Employers added 157,000 jobs in January, in line with analysts’ expectations, and the unemployment rate ticked up a tenth of a percentage point to 7.9 percent, according to the Labor Department.
Mainstream economic forecasters had expected a number around 165,000, and that’s pretty much where private-sector employment came in last month, at 166,000. The overall jobs number was dragged down by 9,000 lost government jobs, the agency’s Bureau of Labor Statistics said.
January’s 157,000 new jobs were slightly below the monthly average of about 180,000 jobs for 2012. If the good news was that employment isn’t deteriorating sharply, the bad news was that even with Friday’s upward revision of November and December estimates by a combined 127,000 jobs, hiring remains challenged.
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The January numbers came on the heels of another government report earlier in the week that showed the economy shrank by an annual rate of 0.1 percent in the final three months of 2012, and that phlegmatic growth is consistent with ho-hum hiring.
It led to the question, when will things get notably better?
If the jobs and growth report disappointed, other economic data released Friday were more positive and sent the Dow Jones industrial average up 149.21 points to 14,009.79, crossing a psychological threshold and posting the highest close since October 2007.
Consumer sentiment, as measured by an index compiled by the University of Michigan and Thomson Reuters, rose in January. An index of manufacturing activity, measured by the Institute of Supply Management, rose Friday to its highest level since last April, well above consensus expectations. Car makers released strong sales data for January: General Motors reported a nearly 16 percent increase over in sales over January 2012, Ford a blistering 22 percent sales improvement.
“The job market started off 2013 on a solid note, and should continue to steadily improve throughout the year. However, it won’t shift into a higher gear until later in the year, after businesses and consumers digest the recent tax hikes and coming government spending cuts,” said Mark Zandi, the chief economist for forecaster Moody’s Analytics. “The unemployment rate should be closer to 7 percent by this time next year.”
If he’s right, it still means that the jobless rate will be stubbornly high and the economy will continue bouncing along at a sluggish annual rate of 2 percent to 2.5 percent.
To begin to knock down the unemployment rate, the economy needs to create 250,000 or 300,000 jobs per month, and that still seems a very tough task. Federal Reserve Chairman Ben Bernanke has said he won’t back away from controversial efforts to stimulate the economy until the jobless rate comes down to 6.5 percent and stays there. Friday’s report suggested that the Fed will stay active in the economy well into next year.
What would it take for improvement? Stronger consumer spending, a continued rise in home sales and removal of doubts about government tax-and-spend policies, said Keith Hall, a senior fellow at George Mason University’s Mercatus Center.
“I think the real holdback is fairly obvious if you look at the GDP numbers,” said Hall, a former commissioner of the Bureau of Labor Statistics.
There’s still uncertainty among households and businesses about future tax increases and whether government spending will contract. Families continue repairing their balance sheets, Hall said, paying down debt, many of them trapped in homes that have lost significant value. Consumption, while improving, is still below historical levels
It all combines to drag against the economy at a time when the growth rate dipped to just 1.5 percent in the last quarter when compared with the same quarter the year before.
“That is not anywhere near enough to get significant job gains,” he said. “That’s just not enough growth to create many more jobs than we’re getting.”
There were positive signs within Friday’s reports, including the addition of nearly 33,000 jobs in the retail sector. Perhaps the best sign came from the hard-hit construction section, which added another 28,000 jobs in January after adding 30,000 in December.
Construction has been in the dumps since the 2008 financial crisis, brought about by problems in mortgage finance. With housing now finally adding to the growth rate after several years of dragging against it, construction employment is expected to continue picking up and might be a bright spot this year.
An improvement in housing should spill over to manufacturing as more people remodel homes, upgrade appliances and purchase lawn care products. For now, however, hiring in the manufacturing sector remains in second gear.
“The report clearly illustrates the slow growth in the manufacturing sector since the beginning of 2012. Last month’s estimate of 25,000 workers added in December has now been revised down to just 8,000,” Chad Moutray, the chief economist of the National Association of Manufacturers, wrote in his blog Shopfloor.org. “In January, the sector added 4,000 net new workers. This reflects the weaknesses that we saw over the second half of the year, and manufacturers have lost 7,000 workers since July overall.”
The Bureau of Labor Statistics, which collects the employment data, revised data for all of 2012. Employers added 2.2 million jobs last year, it said, for a monthly average of nearly 181,000.
“With the latest revisions, the manufacturing sector contributed 9.2 percent of all of the nonfarm payroll jobs added in the first six months of 2012. Since then, it has added just 15,000 workers relative to a nonfarm payroll gain of 1.2 million,” Moutray wrote. “Something is clearly wrong with that picture. We need to move back to a position where manufacturing is once again making outsized contributions to growth and employment.”
Alan Krueger, the head of the White House Council of Economic Advisers, sounded a cautious note.
“Over the last 12 months, the unemployment rate has fallen by 0.4 percentage point, and the labor force participation rate has been essentially unchanged,” he said in a statement. He stressed that the falling unemployment rate over the year doesn’t simply reflect a smaller workforce, but he inadvertently highlighted how intractable the jobless rate appears to be.
Other parts of Friday’s jobs report pointed to the status quo. The number of long-term unemployed, without jobs for half a year or more, remained unchanged at 4.7 million.
The civilian labor-force participation rate and the ratio of the employed to the overall population also were unchanged last month.