The United States added more than 200,000 jobs in December of 2011, building on a strengthening employment market that dominated the second half of the year. This brought the unemployment rate down to 8.5 percent from the revised 8.7 percent, which had been predicted in November. The primary growth was in transportation — primarily courier services that hired for the holidays — healthcare and manufacturing, according to the U.S. Bureau of Labor Statistics.
“It would have been even better without the drag from Europe,” said John Canally, economic strategist at LPL Financial, a stock brokerage firm. “The Europe situation created uncertainty, and uncertainty was used as a reason not to hire until now.” The year ended even more strongly than economists had predicted. They had forecast that employers would add a net 150,000 jobs in December, according to a survey by Factset. They also had predicted that the unemployment rate would tick up to 8.7 percent from November’s 8.6 percent; this is the lowest rate since March 2009.
In the end, November’s unemployment rate was revised up in this report, to 8.7 percent. The better-than-expected monthly gain of 219,000 private-sector jobs means American businesses have replaced more than three million of the 4.2 million private-sector jobs that were lost the past 13 months. The private-sector jobs gained since employment bottomed in February of 2010 marks the strongest recovery since the 1990-1992 recession, when U.S. businesses added 4.2 million jobs in the same amount of time.
The new job numbers highlight the fact that the U.S. economy is on its way to recovery even as strains in Europe persist,” said David Watt, senior currency strategist at RBC Capital in Toronto. The fact that the labor market is gaining traction should be good news to the Obama administration, whose economic policies are relentlessly attacked by the political opposition.
This string of better-than-anticipated economic indicators has highlighted the stark contrast between the recovery in the world’s biggest economy and Europe, which faces bad times for months or even years. Even with the good news, the American economy needs an even faster pace of job growth over a sustained period to make a noticeable dent in the pool of the 23.7 million people who remain out of work or underemployed in the wake of the 2007-09 recession.
December marked the 15th consecutive month that employment numbers have risen. Marcus Bullus, trading director at MB Capital, said: “That’s one hell of a number. Such an impressive fall in both the number of jobless Americans and the unemployment rate will cheer everyone bar Republican spin doctors. The Obama administration could be forgiven for showboating over this convincing evidence that America’s economy is pulling away from Europe’s. From a market perspective, strong US data like this will add to optimism, but nobody doubts the considerable downward pressure the Eurozone will continue to place on the global marketplace during 2012.”
Automatic Data Processing’s (ADP) numbers for December are even more impressive, saying the government added 325,000 jobs in December. ADP’s figures do not always match the government’s, and economists warned that seasonal factors could have boosted the figures. Even so, all the major measures of the job market appear to be on the upswing.
Lasting payroll gains are needed to chip away at joblessness and support household spending, which accounts for approximately 70 percent of the world’s largest economy. The labor market figures come on the heels of recent data showing increased manufacturing and a rebound in consumer sentiment that show the U.S. is barely impacted by Europe’s debt crisis. “You got the trifecta — more people working, wages up and the average work week up,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc., who accurately forecast the December payroll gains. “You can’t really argue that that isn’t a sign of significant improvement in the job market.”
Yearly benchmark revisions showed the unemployment rate averaged 8.9 percent in 2011, down from 9.6 percent and 9.3 percent in the previous two years. It still ranks as the worst three-year period since 1939 to 1941.
Writing in the Wall Street Journal, Phil Izzo says the increase is “for real.” According to Izzo, “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.
“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,” Izzo concluded.