The biggest risk to the improved hiring picture, and the economy, would be if Europe does not manage to contain its sovereign debt problem and it worsens. Some economists argue another risk would be if Congress does not extend the payroll tax cuts or the extended unemployment benefits, which are estimated to put a combined $160 billion into the economy.
“If you’re in an environment where corporate profits are still going up, we’ll probably see better jobs creation in the year ahead. The good news is at the same time we’re seeing fewer layoffs. We’re seeing commodities prices coming down. This is unusual to have both of these things happening at the same time,” said Gary Thayer, chief macro strategist at Wells Fargo Advisors.
“I’m very encouraged that next year, if we’re correct on our GDP forecast, that we’ll probably see better jobs numbers. It won’t be strong employment, but we’ll get some months where jobs will surprise on the upside,” said Thayer.
Thayer said he’s encouraged that hiring has been broad-based, though there was a high concentration of retail jobs in the November jobs report. That report showed the creation of 120,000 jobs, 50,000 of which were in retail. But he said over several months, there has been hiring across a range of industries. The unemployment ratealso improved to 8.6 percent from 9 percent in November.
Tilton said the December jobs report could be roughly the same or slightly better than November, and one area that could show improvement is the construction sector. “I think that’s an area where you might see some improvement over time but from a low base,” he said. “We think house prices are near a bottom. We think construction levels are very low.”
The hiring indicators Tilton watches include the Manpower survey of hiring intentions, which at a positive 9, had its best reading since 2008 this week. The low was negative 2 during the crisis, but the all-time high was in late 2000 when it was at 25, and the average reading since 1975 is 15.
Also encouraging was the National Federation of Independent Business monthly survey this week that showed hiring intentions by small businesses doubled. The NFIB says that while still at weak levels, its employment indicators delivered a significant positive signal and that could mean the unemployment rate should improve a few tenths of a point if these readings continue and more job creation follows.
The NFIB reported that 14 percent of the owners it surveyed added an average of 3 workers over the past few months and 12 percent reduced their worforce by 2.9 workers. Forty-seven percent hired or tried to hire.