The U.S. Labor Department released its monthly "Employment Situation Summary" today, and the stats from December have some financial analysts nearly giddy. "This is the real thing," Ian Shepherdson of High Frequency Economics tells the Times. "This is finally the economy throwing off the shackles of the credit crunch." Fly free, fledgling recovery, fly free! According to the government, 200,000 new jobs were created in December, and the unemployment rate dropped to 8.5 percent, down from a revised rate of 8.7 percent in November, and 9.1 percent in September. The numbers are better than some analysts had expected, and, when seen in the context of previous months' growth, could indicate an "upward trend."
Of course, it's always important to keep in mind that the government only counts people as unemployed if they are actively searching for jobs. Those Americans who have given up on "jobs" and are instead forming large roving gangs of cannibalistic scrap metal pirates are not counted. 13 million Americans remained unemployed last month, and America still has 6 million fewer jobs than it did in December 2007, when the Great Recession began.
Also, the seasonal adjustment could actually make the economy look better than it is—the Times explains that seasonal adjustments "are calculated based on the patterns of recent years. Because the recession began in December 2007, a drop-off at that time of year is now part of the pattern, and anything else looks better by comparison." In addition, home values continue to drop, and a disintegrating European economy could stymie any hopes for a significant recovery over here. "The decent end to 2011 will not become the norm," says Moody's. "As 2012 is ushered in, the U.S. economy will moderate, held back by Europe's recession, choppy markets, and U.S. fiscal policy."
Nevertheless, guarded optimism appears to be widespread this morning. Manufacturing added 23,000 jobs, as did the health care industry, while retailers added 28,000 jobs. Transportation and warehousing added 50,000 jobs, and the AP notes that "even the beleaguered construction industry added 17,000 workers." Another positive sign is growth in small businesses. A report by ADP, the payroll processing company, showed a gain of 325,000 private-sector jobs last month: most of those jobs were at small businesses, and it's mostly new small businesses that use payroll companies.
"People were very much thinking that the sky was falling," another analyst tells the Times. "It’s no small victory that we’re up here, even with all these headwinds." But what's in store for American economy in the coming year "isn't just a guessing game," cautions Ezra Klein, writing for the Washington Post:
A better year isn't simply something we need to hope for. It's something we could govern towards... Start with the simplest possible example: the payroll tax cut. Democrats and Republicans agree that cutting the payroll tax creates jobs and accelerates the economy. That's why they cut it by two percentage points in 2011, and look likely to extend that cut through the end of 2012.
But we could go further: The Obama administration has proposed expanding the payroll tax cut to three percentage points for workers, and cutting the employer-side payroll tax by three percentage points for businesses with less than $5 million in payroll.
